Review of Alleged Inappropriate Contract Actions Related to VA’s Lease of a Digital Imaging Network-Picture Archival Communication System

In June 2015, the Office of Inspector General received an allegation regarding the procurement strategy used by VA under the Department of Defense (DoD) Digital Imaging Network-Picture Archival Communication (DIN-PACS) contract. The complainant alleged that VA did not perform a proper business case analysis of its procurement strategy of leasing versus purchasing DIN-PACS. The complainant further alleged technical evaluations were manipulated, excessive amounts of equipment were purchased, and an award was made at a cost 30 percent higher than recommended by the contracting officer. We reviewed the Veterans Integrated Service Network 1 DIN-PACS lease and found that VA did not adequately evaluate the advantages or disadvantages of leasing versus purchasing DIN-PACS. Furthermore, VA did not comply with the Federal Acquisition Regulation (FAR) and DoD contract, as required by the contract terms, and determine that prices were fair and reasonable once it elected to use the DoD contract to lease the DIN-PACS. This occurred because VA’s contracting officer misinterpreted an internal directive and did not fully comply with FAR Part 7.4, which requires a lease versus purchase analysis. The contracting officer did not ensure the acquisition team fully complied with FAR to conduct this analysis even after receiving advice from VA’s General Counsel In addition, VA lacked documented evidence of a formal contract oversight review as required by VA’s Integrated Oversight Process. As a result, VA’s contracting officer’s decision to lease DIN-PAC systems at an estimated value of $9 million could lead to the wasteful spending of taxpayer dollars. We did not substantiate that VA manipulated technical evaluations, purchased excessive amounts of equipment, or made an award 30 percent higher than recommended. We recommended the Deputy Assistant Secretary for Acquisition and Logistics develop procedures to ensure the acquisition team complies with the fundamental requirements of FAR and contracting officers comply with DoD contract terms. The Principal Executive Director concurred with our recommendations. We consider their corrective action plans acceptable and will follow up on the implementation.