Report Summary

Title: Review of VA’s Award of the PC3 Contracts
Report Number: 15-01396-525 Download
Issue Date: 9/22/2016
VA Office: Veterans Health Administration (VHA)
Office of Acquisitions, Logistics, and Construction (OALC)
Office of Small & Disadvantaged Business Utilization (OSDBU)
Report Author: Office of Audits and Evaluations
Report Type: Audit
Release Type: Unrestricted

We reviewed Department of Veterans Affairs (VA) Patient-Centered Community Care (PC3) contracts to determine whether they were adequately developed and awarded. In September 2013, VA awarded the PC3 contracts to provide veterans with a comprehensive, nationwide network of high quality, specialty health care services. The contracts were awarded for an estimated $9.4 billion, with a potential cost to VA of $27 billion. We found significant weaknesses in the planning, evaluation, and award of the PC3 contracts. The PC3 contracts were not developed or awarded in accordance with acquisition regulations and VA policy intended to ensure services acquired are based on need and at fair and reasonable prices. The contracting officials solicited proposals from vendors without clearly articulating VA’s requirements. Thus, the vendors bidding on the solicitation did not have sufficient information on the type of specialty health care services they would need to provide, where to provide them, and the frequency. Therefore, VA increased the risk of not achieving the objectives of PC3 by inadequately identifying its health care service requirements. We found that documentation supporting vital contract award decisions was either not in VA’s Electronic Contract Management System or incomplete. Of the documents available, we noted that the awarded costs were actually negotiated at a higher rate than originally proposed by one of the vendors. The evidence for these decisions was not documented in the price negotiation memo. Accountability for ensuring the effective award of these contracts was not vested with a senior executive at VA. Although the contracting officer had the authority to execute these contracts, the level of oversight for this degree of contract risk did not provide reasonable assurance that VA’s interests were adequately protected. The Veterans Access, Choice, and Accountability Act of 2014 (Choice) was enacted on August 7, 2014. According to VA’s Under Secretary for Health in a memo dated July 7, 2016, since implementing the Hierarchy of Care memorandum in May 2015, the use of Choice has increased tremendously, while PC3 use has dwindled. We recommended the Principal Executive Director for Acquisition, Logistics, and Construction improve oversight and accountability, and ensure sufficient planning on all high dollar value and complex acquisitions. The Principal Executive Director concurred with our recommendations and provided technical comments. An acceptable corrective action plan was provided and we will follow up on its implementation.

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