A VA Inspector General’s audit released this month found the agency was overpaying some manufacturers in part because contracting officers didn’t negotiate costs or use pricing guidelines.
House Veterans Affairs Committee Chairman Jeff Miller, the Florida Republican who requested the investigation, said the findings would be the subject of a hearing later in the spring.
“I intend to provide aggressive oversight to ensure that VA is effectively meeting the needs of all our wounded warriors and that payment controls are strengthened,” Miller told Military.com in a statement.
The Inspector General found that in 2010 alone, the VA was overcharged by more than $2 million. And unless the VA beefs up its acquisition controls, the agency can expect to pay more than $8 million in overcharges in the next four years, the report concludes.
The VA in 2010 spent about $54 million in 2010 on prosthetic limbs, with the Veterans Health Administration’s laboratories fabricating about 1,500 limbs for a total cost of $4.4 million. Another 4,000 limbs were manufactured by private vendors for a total cost of just over $49 million.
The IG report said the VHA-built prosthetic cost about $2,900 on average, as compared to an average of about $12,000 for those supplied by a private vendor.
The IG looked at four of the VHA’s 21 Veterans Integrated Service Networks, and found that contracting officers in three of the networks failed to negotiate for better prices as required by the Federal Acquisitions Regulation.
The VA does not have a single, national supplier for prosthetic arms and legs. When regional prosthetics labs cannot meet their needs, officials contract with local companies. The VHA, working through the VINS, awards contracts to manufacture, service and repair prosthetic limbs. The VISN contracts spell out the cost of vendor-fabricated prosthetic limbs, and according to the prosthetic limb contract guidance, the costs shouldn’t exceed the established prices applicable to their specific geographic area. Those prices are established annually by Medicare and vary by state, according to the IG report.
But a major problem, the IG found, was that contracting officers assigned to the VISNs were not negotiating for the discount rates and VHA was buying items without benefit of the pricing guidance.
Furthermore, the report found that VHA management did not know the capabilities of its own labs, that network officials had not identified the all the contract vendors available, and that contracting officers were not properly documenting contract awards.
Until VHA improves its management and acquisition practices for buying and making prosthetic limbs the VA will not have assurances that the practices are as effective and economical as possible, the report said.
In the case of network covering Kansas and Missouri, even though contracting officers did not negotiate for what could have been discounts of 10 percent, discounts provided by the vendors still averaged out to 12 percent.
But in other cases not negotiating did not work out for the VA. The network covering New England failed to negotiate costs with all 36 of its vendors and received an average discount of 8 percent in 2010. Had it gotten a minimum discount of 10 percent, it would have saved $58,000.
“By negotiating discount rates with vendors, VHA likely would have ensured it received a better value for the $49.3 million spent in FY 2010, though it is our opinion that receiving a better value should not come at the expense of receiving lesser quality prosthetic limbs,” the IG report stated.
The VA said it is going over the data uncovered by the IG and have VHA’s finance office take action to recover the overpayments by the end of the current fiscal year.
The agency said it will also be reviewing VHA prosthetic limb contracts to make sure they comply with acquisition regulations and developing new guidance for processing the Medicare-based pricing codes.
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