WASHINGTON, DC—There is a clear need of reform of acquisition procedures within VA, legislators declared last month at a House VA Oversight subcommittee hearing. Reports by GAO and the VA Inspector General have shown that VISN directors and VA medical center staff failed to use the Federal Supply Schedule due to lack of information and the proper tools needed to use FSS, resulting in a lost savings of almost $8.2 million a year.

Legislators also expressed concern that lack of oversight on VA’s part allowed for fraud and abuse, with companies claiming that service-disabled veterans were fallaciously owed small business status, and improperly received contracts targeted at SDVOSBs.

Chief Acquisitions Officer

“It is no secret that there are major deficiencies within VA’s procurement process, and a number of things, including a lack of a centralized acquisition structure and self-policing policies that allow for fraud and abuse. ” explained subcommittee chair Rep Harry Mitchell, D–AZ. “Although I remain fairly optimistic that reform of this system can be accomplished, legislation to fix these problems may be necessary, along with change in policy and procedures.”

One piece oflegislation expected to have an impactis HR 4221, “TheVAAcquisition ImprovementAct of2009.”The bill would create an Assistant Secretary position to act as chief acquisition officer—a move recommended by a Price Waterhouse Cooper study commissioned by VA. The bill would also build an acquisition workforce structure through the use of Deputy Assistant Secretaries aligned to VA’s business lines.

The bill also requires the VA Secretary to establish a department-wide acquisition program that can enforce a streamlined approach to entering into contracts and procuring goods and services. “This is a first step to provide a centralized oversight and policy for contracting and acquisition within the department,” explained Rep Steve Buyer, R–IN the bill’s chief sponsor. “It is my hope that we can work together to improve this bill, and create an acquisition model that can eventually be followed by other agencies, because VA’s acquisition problems are government wide.”

Contracting Fraud

GAO officials also testified that VA had distributed millions of dollars in SDVOSB contracts to businesses that were ineligible to receive them. The report released last month identified 10 case studies where poor oversight on VA’s part, or fraud on the part of the business applying for the contract, resulted in $100 million in SDVOSB contracts being misallocated, along with an additional $300 million in non-SDVOSB funds.

A construction contract was awarded to a firm in Carnegie, PA that was later found to be run by a non-service disabled veteran. Despite being found to be ineligible, VA allowed the firm to continue multiple SDVOSB contracts, because there are no requirements for agencies to terminate contracts awarded to ineligible firms. In another case, a full-time federal contract employee at MacDill Air Force Base set up a SDVOSB company that passed a $900,000 furniture contract on to a company where his wife worked, which passed the work to a furniture manufacturer that actually delivered and installed the furniture.

In a number of instances, the service-connected disabled veteran whose status was used to obtain the contract was discovered to be an employee and not the owner, or was an employee somewhere else entirely—a practice referred to as “rent-a-vet.”

According to GAO, the federal government does not have an effective fraud prevention system in place for SDVOSB programs.Awell-designed system would have procedures in place for up-front preventive controls, detection, and monitoringoffraud,andastructureforinvestigationsandprosecutionsaccordingtothereport’sauthors. VAhasrecentlytakenstepsto develop a validation program for contracts it awards to SDVOBs and other veteran-owned small businesses, which would address GAO’s concerns about up-front prevention. However, the program is not fully implemented.

“There is a lack of due diligence regarding firms that do business with VA, there is no clearinghouse for contracting data and this lack leads to hidden and invisible contracts, there are no consequences for abusive firms, and there is a process of self certification that continually leads to fraud,” declared Rep Bob Filner, D–CA chairman of the full House VACommittee.“This Committee is committed to providing necessary resources to VA, but those resources are intended for veterans.”

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