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Hon. Bill Johnson, Chairman, Subcommittee on Oversight and Investigations

Good morning.  This hearing will come to order.

I want to welcome everyone to today’s hearing on “Inspect What You Expect: Construction Contracting Practices at VA”. 

I would also like to apologize in advance that I may have to leave early for a mark-up at the Natural Resources Committee taking place this morning.  I know that some other members of this subcommittee may also be affected by the mark-up, and we will get through the hearing as best we can or recess if necessary. 

In a department the size of VA, the contracting process involves billions of dollars annually.  These funds are necessary to ensure those who so bravely served this country are provided the care and benefits they have earned.

However, problems arise when the contracting process is mismanaged, and poorly executed contracting on the scale of billions of dollars- such as what we see at VA- can mean billions of dollars wasted, taxpayer dollars that were supposed to help the veteran. 

A contracting process done correctly can actually help an organization save money in the long run.  Good contracting on a construction project entails having an independent cost analysis of all available options, eliminating preferential treatment, and executing a timely process that results in a product delivered in a timely fashion at the correct cost. 

VA has acknowledged it could improve the quality of its contracting process through use of the Electronic Contract Management System, or “eCMS.”  In June of 2007, an Information Letter was issued by VA’s Executive Director of the Office of Acquisition and Logistics mandating the use of eCMS.  This database would record and track procurement actions of over $25,000, and the data could then be easily and comprehensively reviewed to determine the effectiveness of VA’s contracting processes and make changes where necessary.  Cost overruns could be identified and addressed early on, and perhaps even prevented in the first place. 

This sensible approach to overseeing the contracting process could prevent wasted funding, potential fraud, and reduce overall contract mismanagement.  For some reason, despite its mandated usage, many supervisors and managers across VA chose to ignore eCMS, instead allowing the contracting system and runaway associated costs to continue as before. 

VA’s Office of Inspector General found clear cases of missing and incomplete information, and in one test discovered that 83 percent of the transactions that should have gone into eCMS were left out.  Examples such as this dilute the value of eCMS as an accountability measure, and in the end veterans and taxpayers bear the loss.  While VA acknowledged the OIG’s findings and concurred with recommendations for improvement, it is my wish to see concrete evidence of that improvement. 

Reports of other clear cases of contract mismanagement are equally disturbing, including bundling contracts as well as splitting contracts, as substantiated by the Deputy Assistant Secretary for Acquisition and Logistics nearly a year ago. 

As these contracts are mishandled, needed construction is slowed considerably and the needed services that a new medical facility would provide are further delayed.  Again, those who are hurt most by this are the veterans. 

If we are to get this right, there must be decisive leadership in contracting and accountability for actions at all levels.  If eCMS was mandated by VA’s leadership to be used, why then is it obviously not being used? If contracts on a construction project are intended for veteran-owned small businesses, why would a large business be competing for them?  If plans are put in place for an expanded outpatient clinic, why then would the size and scope of that project change, not once, but twice

It is past time for these billions of construction contracting dollars to be used effectively, efficiently, and in a timely fashion so the veterans who need the services provided by these facilities can access them. 

I appreciate everyone’s attendance at this hearing and I now yield the Ranking Member for an opening statement.