Summary of Fiscal Year 2021 Preaward Reviews of Healthcare Resource Proposals from Affiliates

The VA Office of Inspector General (OIG) completed 32 preaward reviews of sole-source healthcare proposals in fiscal year 2021 and provided information that VA contracting officers could use to help negotiate fair and reasonable prices. The proposals typically come from VA affiliated institutions such as colleges and schools of medicine. The combined estimated contract value of the 32 proposals reviewed was $305 million. The OIG identified a total of $102.5 million in potential cost savings for 29 of those proposals. As of March 2022, VA contracting officers had awarded 30 proposals and had sustained at least $44 million in cost savings. OIG reviews of the individual contract proposals were not previously published because they contain clinical staff’s sensitive personal data. This report, however, summarizes the OIG’s prior findings and recommendations in three areas: costs underlying proposed hourly rates, offered per-procedure prices, and potential conflicts of interest. For 27 of the 29 proposals reviewed that contained hourly rates, the prices offered to the government were higher than the supported amounts and contracting officers were urged to obtain lower prices. Frequently occurring issues included unsupported provider salaries, administrative expenses, fringe benefits amounts, and malpractice insurance premiums. The four proposals with per-procedure pricing all offered prices higher than the properly calculated Medicare rates and so the OIG recommended contracting officers also obtain lower prices. For 22 of the 32 proposals, there were potential conflicts of interest for VA personnel. These personnel held faculty appointments at the affiliated institutions and potentially would also have responsibilities related to the affiliate’s services. In each instance, the OIG recommended the contracting officer request an opinion from VA’s Office of General Counsel on whether these individuals would have a financial interest in the proposal.