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VA OIG “Recommends” that VHA Stop Wasting Millions on Service Contracts

A recent VA OIG audit addressed the following question: are systematic deficiencies in the Veterans Health Administration’s (VHA) contracting processes causing money to be wasted on support service contracts?

Without any surprise, the answer is a resounding “yes.”  In essence, in a report released on November 19 (the “OIG Report”), the VA OIG found that the VHA did not have effective internal controls or follow existing controls to ensure adequate development, award, monitoring, and documentation of support service contracts.

Within a statistical sample of 95 support service contracts, the OIG found 1 or more contract deficiencies in each. Here are a few examples of the deficiencies found:

  • Contract files did not always have sufficient evidence to support source selection, price reasonableness determinations, and required approvals for advisory and assistance services.
  • Contracting officers did not ensure contracts complied with key aspects of the contract award process, such as signing of contracts before the contracts’ effective date or safeguarding that awards did not use prohibited contracting practices.
  • Contracting officers did not ensure paid invoice amounts were correct and funds were de-obligated following contract completion.
  • Contracting officers did not include a complete history of contract actions in VA’s mandatory eCMS.

Not only that, but the OIG found that the VHA did not make sure that contracting officers delegated and met with contracting officer’s representatives on required contracts. As a result, the OIG projected:

  • VHA awarded 1,400 contracts without adequate source selections that could have saved $17.6 million, and it awarded 810 contracts using prohibited contracting practices totaling $122.7 million.
  • VHA did not pay invoice amounts correctly or de-obligate completed contract funds properly for 790 contracts with errors totaling $18.6 million.

The OIG Report estimates that if the VHA does not take action, it will inappropriately compete, award, and manage support service contract funds totaling $159 million annually for support service contracts or $795 million over the next 5 years through FY 2019. Among other things, the OIG found that contracting officers did not ensure that contracts complied with important aspects of the contract development process, to include: not following appropriate source selection procedures, not adequately documenting price reasonableness determination; and not obtaining A&A approvals.

To address these issues, the OIG issued a number of recommendations (see page 15 of the OIG Report). Among others, the OIG recommended that the Interim Under Secretary of Health: implement a quality assurance program that provides sufficient oversight to ensure that contracting issues are corrected by the responsible contracting office; implement a mechanism to facilitate and ensure contracting officers’ performance can be objectively evaluated against their performance standards; and monitor contracting officer performance deficiencies and ensure training is provided to correct these identified deficiencies.

A copy of the draft report was provided to the Interim Under Secretary for Health, who signed a letter stating that she concurred with the report’s recommendations. Included with the letter was a corrective action plan for addressing the OIG’s recommendations (see Appendix D, pages 23-6 of the report). Its target completion date is March 2015. We’ll see….

Access the VA’s OIG report here.

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