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Sole Source Contracting Between VA and Health Care Providers

Sole-source contracting between Department of Veterans Affairs and affiliates. Images are ©
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VA facilities have the authority to enter into contractual agreements with medical schools and affiliates to share medical resources and to receive funds for the use of such resources.

The information on this webpage addresses many of the issues related to the development and management of medical sharing contracts.

MSO News


* Please note: Several of these policies, including VA Directive 1663 are currently in VA IQ for revision.

Health Care Resources Contracting - Buying - Title 38 U.S.C. 8153
Policies and responsibilities for implementing and managing sharing agreements.
VA Directive 1663 Adobe Acrobat file

Health Care Resource Sharing Authority - Selling
VHA may enter into sharing agreements or contracts for the sale of VHA health care resources.
VHA Handbook 1660.01 Adobe Acrobat file

Joint Acquisition of Medical Equipment
This program promotes joint acquisition and use of medical equipment; sharing between VA and other eligible providers.
VHA Handbook 1660.2 Adobe Acrobat file

Conflict of Interest Aspects of Contracting for Scarce Medical Specialist Services, Enhanced Use Leases, Health Care Resource Sharing, Fee Basis and Intergovernmental Personnel Act Agreements (IPAS)
A Government employee who is employed by a contractor is prohibited from participating personally and substantially on behalf of the Government in a contract with that contractor.
VHA Handbook 1660.3 Adobe Acrobat file

Enhanced Sharing Use of Space Program
This VHA Directive establishes new application and review requirements for the Sharing Use of Space Program authorized under Title 38 USC 8153.
VHA Directive 1820 Adobe Acrobat file


VHA Prosthetics and Clinical Logistics Office: 
Provides administrative oversight and initiates policy guidance.

Sandra Hallmark, CPCM
Department of Veterans Affiars
VHA Office of Procurement & Logistics (10NA2)
Director, Medical Sharing Affiliate Office (MSO)
817-385-5917 (office)

Frequently Asked Questions

Conflict of Interest | Joint Acquisition | Space Sharing 

Contracting for Health Care Resources

When must a health care resources contract be competitively awarded?

All Health Care Resources contracts, that do not require the acquisition of the services of Affiliated University faculty members to perform the services of the contract, must be awarded competitively when two or more providers that can fulfill VA contract requirements of the health care resource are available.
(VA Directive 1663 Para. 2. c.)

When do health care resources contracts require a pre-award audit?

All Health Care Resources contracts awarded non-competitively that exceed the dollar thresholds defined in VA Directive 1663 require a pre-award audit by the Office of Inspector General (OIG) to be completed within the timeframe set forth in this Directive. When unusual and compelling urgency requires immediate contract award and performance, an audit must be performed post-award.

All non-competitive initially signed proposals valued at $500,000 or more require a pre-award audit by the OIG, prior to beginning price negotiations, except as set forth in the following.

  • The OIG must complete the pre-award audit within 20 business days. Thereafter, the Contracting Officer may proceed with award.
  • Upon determination by the Contracting Officer that unusual and compelling urgency requires immediate award without a pre-award audit, the OIG shall perform a post-award audit of the contract.
  • Following the OIG review, negotiations with the Contractor commence. If the contract is under $5,000,000, the VA Contracting Officer may execute the contract upon incorporation of any required changes and final negotiations.

(VA Directive 1663 Para. 2. d. & Para. 4 b. (8)(a)(b), (9))

May an affiliate include an allowance for profit in a sole-source contract for work performed at the affiliate?

Profit is discouraged because these contracts are non-competitive, and the medical school receives other benefits through its affiliation with VA. The Affiliate derives significant benefits from the affiliation agreement such as VA's training of residents at VA medical centers.
NOTE: If any profit is allowed, it must be shown as a discreet item in the cost or pricing data.
(VA Directive 1663 Para. 4. b. (6))

What monitoring procedures must be used by the VA to ensure contract compliance?

Monitoring  procedures must be able to demonstrate through time and attendance logs, operating room records, minutes of meetings or other appropriate electronic records, that VA has received services called for under the contract. This description must identify the VA official(s) by title to be designated as the Contract Officer Technical Representative, who is responsible for verifying contract compliance.
(VA Directive 1663 Para. 4. d., 2)

When should sole-source awards with affiliates be considered?

Sole-source awards with affiliates must be considered the preferred option whenever education and supervision of graduate medical trainees is required (in the area of the services contracted). The contract cost cannot be the sole consideration in the decision on whether to sole source or to compete.
(VA Directive 1663 Para. 4. a., 2, (a))

What determines fair and reasonable pricing?

While complying with all applicable laws and regulations, the price basis for acquiring health care resources should be as flexible as possible. At a minimum this should include the direct purchasing of provider time (by FTE or by hour) and health care services (cost per procedure or relative value unit (RVU)-based contracts), as appropriate. Similarly, VHA should be allowed to use the same reimbursement methodologies as other government agencies, such as the Centers for Medicare and Medicaid (CMS), Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA), or TRICARE.

Contracts should be based on market prices as assessed by appropriate local and regional market analyses. Contracts should not exceed applicable Medicare rates unless there is adequate justification documented in the contract file.

Additional requirements for contract physicians (such as administrative activities, supervision of trainees, on call availability, rounds, etc.) and/or additional contract requirements (such as credentialing, technology infrastructure, etc.) may be examples of potential justifications for exceeding the Medicare rate. Medicare itself acknowledges the additional costs of providing medical education through the Indirect Medical Education supplement provided to teaching hospitals.
(VA Directive 1663 Para. 4. b., (1), (a)(b)(c))

Conflict of Interest

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Conflict of interest. Image is © What specific activities are prohibited to VA physicians or clinicians who have a financial interest in a contract with an affiliated medical school?

  • Drafting specifications or solicitations
  • Acting as Contracting Officer's Technical Representative
  • Negotiating any parts of the contract, including price
  • Evaluating bids or proposals
  • Selecting or recommending the contractor
  • Reviewing, certifying, or approving the contract itself, or any award, modification, extension, specification, bid, proposal, payment voucher, time record, or any other document of significance to the contract
  • Reviewing or reporting time and attendance for contract administration purposes

NOTE: These prohibitions also apply to any non-affiliated entity in which a VA employee has a financial interest.
(VHA Handbook 1660.3 Para. 6)

What specific activities are permissible by VA physician or clinician who has a financial interest in a contract with an affiliated medical school?

  • Supervising professional services provided under the contract solely for purposes of ensuring quality of care
  • Developing workload projections, so long as such projections are developed independently of the contract for purposes of operating the VA facility and not developed for purposes of contract specification or for contract renewal
  • Providing direct patient care within VA responsibilities
  • Performing oversight and administration within the employee's VA responsibilities, including record keeping, and quality assurance activities conducted as part of medical facility operations
  • Participating in any manner in any particular matter in which neither the employee nor the school has a financial interest, (e.g., acting as Contract Officer Technical Representative (COTR) in another contract which does not involve the physician's or clinician's outside employer)
  • Engaging in permissible outside activities, such as approved teaching by a full-time employee

(VHA Handbook 1660.3 Para. 7)

Joint Acquisition of Medical Equipment

Who must review and approve proposals for the Joint Acquisition of Medical Equipment?

  • All proposals with project costs below $500,000 shall be reviewed by Regional Counsel and shall be approved by the Veterans Integrated Service Network (VISN) Director, or designee
  • Proposed projects in excess of $500,000 shall be forwarded to VA Central Office, Medical Sharing Office (166).

(VHA Handbook 1660.2 Para. 4, d, e)

May new lithotripters and Positron Emission Tomography (PET) be purchased under the Joint Acquisition of Medical Equipment program?

No. However, upgrades for lithotripters and PETs previously purchased under this program can be considered by the medical center or VISN.
(VHA Handbook 1660.2 Para. 7)

Who owns the title to equipment jointly purchased?

Title to the equipment will be jointly held by each sharing partner.
(VHA Handbook 1660.2 Para. 8)

May VA transfer jointly owned equipment to another VA facility?

Where programmatically appropriate and economically feasible, and with the consent of the sharing partner, a VISN Director may upgrade and transfer equipment purchased under this program to any other location in VHA that has appropriate workload volumes and requirements.
(VHA Handbook 1660.2 Para. 8)

Space Sharing

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May sharing partners use their own resources to make capital improvements to existing VHA space?

Yes. However, VA Central Office must approve the proposed VA medical center-sponsored non-recurring maintenance or partner-sponsored capital improvements in advance.
(VHA Handbook 1820.1 Para. 4, e)

May construction program funds be used to renovate existing VHA space that is to be used solely by the sharing partner?

No. Neither major nor minor construction program funds may be used.
(VHA Handbook 1820.1 Para. 4, g)

May a sharing partner sublet the use of VHA space obtained through a use of space sharing agreement?

No. Not under any circumstances.
(VHA Handbook 1820.1 Para. 4, j)

Can supplies be included in a proposal for sharing the use of space?

Usually, no. However, providing supplies may be considered only if the supply component is a minor portion of the total cost to the sharing partner.
(VHA Handbook 1820.1 Para. 4, i, (1), (2), (3))