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LACK OF OVERSIGHT OF INTERAGENCY AGREEMENTS—VA PROCUREMENT FAILURES CONTINUED 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

TUESDAY, JULY 21, 2015 

Serial No. 114–33 

Printed for the use of the Committee on Veterans’ Affairs 

( 

Available via the World Wide Web: http://www.fdsys.gov 


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COMMITTEE ON VETERANS’ AFFAIRS 

JEFF MILLER, Florida, Chairman 

DOUG LAMBORN, Colorado 

GUS M. BILIRAKIS, Florida, Vice-Chairman 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

MIKE COFFMAN, Colorado 

BRAD R. WENSTRUP, Ohio 

JACKIE WALORSKI, Indiana 

RALPH ABRAHAM, Louisiana 

LEE ZELDIN, New York 

RYAN COSTELLO, Pennsylvania 

AMATA COLEMAN RADEWAGEN, American 

Samoa 

MIKE BOST, Illinois 

CORRINE BROWN, Florida, Ranking 

Minority Member 

MARK TAKANO, California 

JULIA BROWNLEY, California 

DINA TITUS, Nevada 

RAUL RUIZ, California 

ANN M. KUSTER, New Hampshire 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

JERRY MCNERNEY, California 

JON TOWERS, Staff Director 

DON PHILLIPS, Democratic Staff Director 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION 

MIKE COFFMAN, Colorado, Chairman 

DOUG LAMBORN, Colorado 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

JACKIE WALORSKI, Indiana 

ANN M. KUSTER, New Hampshire Ranking 

Member 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Veterans’ Affairs are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to prepare 

both printed and electronic versions of the hearing record, the process of converting between 

various electronic formats may introduce unintentional errors or omissions. Such occurrences 

are inherent in the current publication process and should diminish as the process is further 

refined. 


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C O N T E N T S 

Tuesday, July 21, 2015 

Page 

Lack of Oversight of Interagency Agreements—VA Procurement Failures Continued .................................................................................................................... 1 

OPENING STATEMENTS 

Mike Coffman, Chairman ........................................................................................ 1 

Prepared Statement ......................................................................................... 25 

Ann Kuster, Ranking Member ................................................................................ 2 

WITNESSES 

Mr. C. Ford Heard III, Associate Deputy Assistant Secretary, Procurement 

Policy, Systems and Oversight, U.S. Department of Veterans Affairs ............ 4 

Prepared Statement ......................................................................................... 26 

Accompanied by: 

Mr. David A. Orso, Executive Director, Enterprise Program Management 

Office, Office of Policy and Planning, U.S., Department of Veterans 

Affairs 

And 

Ms. Michele R. Foster, Associate Executive Director, Technology Acquisition Center, Office of Acquisition Operations, U.S. Department of 

Veterans 

Ms. Michele Mackin, Director, Acquisition and Sourcing Management Team, 

U.S. Government Accountability Office, Executive Summary ......................... 5 

Prepared Statement ......................................................................................... 34 

SUBMITTED MATERIALS FOR THE RECORD 

Executive Summary ................................................................................................. 50 

Questions and Responses ........................................................................................ 51 


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LACK OF OVERSIGHT OF INTERAGENCY 

AGREEMENTS—VA PROCUREMENT FAILURES CONTINUED 

Tuesday, July 21, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON VETERANS’ AFFAIRS, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 4:02 p.m., in Room 

334, Cannon House Office Building, Hon. Mike Coffman [chairman 

of the subcommittee] presiding. 

Present: Representatives Coffman, Lamborn, Roe, Huelskamp, 

Walorski, Kuster, O’Rourke, and Walz. 

OPENING STATEMENT OF CHAIRMAN MIKE COFFMAN 

Mr. COFFMAN. Good afternoon. This hearing will come to order. 

I want to welcome everyone to today’s hearing entitled ‘‘Lack of 

Oversight of Interagency Agreements—VA Procurement Failures 

Continued.’’ This hearing will examine serious problems with VA’s 

use of interagency agreements to procure certain services and will 

also focus on Federally Funded Research and Development Centers, which we will refer to as FFRDCs for ease of reference. 

Interagency agreements, in this case where other agencies may 

contract or perform services for VA, can be a proficient procurement method. However, these acquisitions may pose a variety of 

risks in part because of the need for stronger internal controls and 

clear definitions of agency roles and responsibilities. As we see 

today, and we have seen from VA for years, internal controls, management, and oversight are tremendous problems for VA. 

Additionally, VA has relationships with FFRDCs, privately 

owned but government-funded entities that have long-term relationships with Federal agencies intended to meet special long-term 

research or development needs that cannot be met as effectively by 

existing in-house or contractor resources. FFRDCs are granted special access beyond that which is common for normal contractual relationships to government and supplier data. 

Following an investigation of these issues begun last Congress, 

I asked GAO to look into VA’s oversight and management of these 

relationships. Unfortunately, what GAO found is typical regarding 

data reliability within VA. 

For instance, VA cannot account for the extent to which it utilized interagency agreements for fiscal year 2012 through fiscal 

year 2014. For this period, VA had data showing that it obligated 

at least $1.7 billion for this period, when in fact GAO found that 


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this amount was actually between $2.6 billion and $2.9 billion, 

amounting to a $600 million to $900 million inconsistency. 

Further, half of the interagency agreements GAO reviewed did 

not contain necessary documentation, which is another of the many 

instances where VA’s poor oversight and management of its procurement processes leaves the Department open to rampant waste, 

potential fraud, and certain abuse. 

Similarly, VA obligated $260 million in this same fiscal year 

2012 through fiscal year 2014 period to FFRDCs. 

One downfall with FFRDCs is that they are noncompetitive, as 

is evidenced by the fact that nearly all of VA’s relationships with 

them are with those operated by one corporation. 

Additional, shortfalls GAO found with VA’s data include a failure 

to centrally track some contract actions, limited documentation of 

pre-award reviews, and in some cases contract files that did not indicate why VA determined a contract price was acceptable. 

This hearing will highlight yet another set of contracting problems within VA, where hundreds of millions, if not billions of dollars are unaccounted for. In a time where VA has come back to 

Congress to ask for an additional $3 billion because it has run out 

of money it should have to serve veterans, I consider this another 

grave failure. 

I look forward to the discussions we will have here today on this 

important issue. 

With that, I now yield to Ranking Member Kuster for any opening remarks she may have. 

[THE PREPARED STATEMENT OF CHAIRMAN MIKE COFFMAN APPEARS IN THE APPENDIX] 

OPENING STATEMENT OF RANKING MEMBER ANN KUSTER 

Ms. KUSTER. Thank you, Chairman Coffman, for holding this 

hearing. 

And thank you to our witnesses for joining us here today. 

We are here yet again to address VA’s longstanding procurement 

problems. Today it is interagency agreements and Federally Funded Research and Development Centers, the FFRDCs that the chair 

has spoken about, and the VA’s inability to oversee and properly 

manage these agreements and contracts. 

VA has known from at least 2009, when the first IG report came 

out, that these interagency agreements were not being properly 

documented in VA’s contract management system. In 2014, a second IG report found VA has the same problem, incomplete and inaccurate documentation. 

The first report should have been a wake-up call. The second report was certainly a distress signal. And GAO’s most recent report 

shows that little has been done to address these issues, and in 

some cases unclear guidance has caused greater confusion and contributed to additional reporting inaccuracies. VA’s procurement organization and business practices need serious reform now. 

Tomorrow our committee will address VHA’s almost $3 billion 

budget shortfall. Like many of the other problems VA faces, and 

like most of the issues we address here in this committee, this is 

the direct result of VA’s inability to accurately report and use data. 


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If VA had accurate data, it wouldn’t be here today explaining 

why it doesn’t have clear processes in place to ensure it is accurately managing its interagency agreements. If VA had accurate 

data, we wouldn’t be here having questioning why MITRE Corporation has been awarded contracts instead of commercial contractors. 

And if VA had accurate data, it would be able to plan and request 

a budget that would meet the needs of our veterans and we 

wouldn’t be holding a hearing tomorrow on the budget shortfall. 

I’d like to know from our VA witnesses why it is so difficult for 

VA to accurately manage its contracts and agreements. VA has 

promised us a solution earlier this summer to manage procurement 

and ensure accurate data reporting, and I’d like to know when we 

will have this solution. 

Finally, I’d like to know why VA has not used the tools it has 

at its disposal to hold employees accountable for not accurately documenting these transactions or acting to address these numerous 

IG and GAO reports. I’m more convinced than ever that major reforms are needed across VA to accurately manage procurement. VA 

needs an agency-wide transformation to bring its business practices 

into the 21st century to meet the needs of our well-deserving veterans. 

Thank you, Mr. Chairman, and I yield back the balance of my 

time. 

Mr. COFFMAN. Thank you, Ranking Member Kuster. 

I ask that all members waive their opening remarks as per this 

committee’s custom. 

With that, I invite the first and only panel to the witness table. 

On the panel for the Department of Veterans Affairs we have Mr. 

Ford Heard, Associate Deputy Assistant Secretary for Procurement 

Policy, Systems, and Oversight. He is accompanied by Mr. David 

Orso, Executive Director of the Enterprise Program Management 

Office in the Office of Policy and Planning, and Ms. Michele Foster, 

Associate Executive Director of the VA’s Technology Acquisition 

Center. 

For the Government Accountability Office, we have Ms. Michele 

Mackin, Director of the Acquisition and Sourcing Management 

Team. 

I ask the witnesses to please stand and raise your right hand. 

[Witnesses sworn.] 

Mr. COFFMAN. Please be seated. 

Mr. Heard, you are now recognized for 5 minutes. 


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TESTIMONY OF MR. C. FORD HEARD III, ASSOCIATE DEPUTY 

ASSISTANT SECRETARY, PROCUREMENT POLICY, SYSTEMS 

AND OVERSIGHT, U.S. DEPARTMENT OF VETERANS AFFAIRS, 

ACCOMPANIED BY MR. DAVID A. ORSO, EXECUTIVE DIRECTOR, ENTERPRISE PROGRAM MANAGEMENT OFFICE, OFFICE OF POLICY AND PLANNING, U.S. DEPARTMENT OF VETERANS AFFAIRS, AND MS. MICHELE R. FOSTER, ASSOCIATE 

EXECUTIVE DIRECTOR, TECHNOLOGY ACQUISITION CENTER, OFFICE OF ACQUISITION OPERATIONS, U.S. DEPARTMENT OF VETERANS AFFAIRS; AND MS. MICHELE MACKIN, 

DIRECTOR, ACQUISITION AND SOURCING MANAGEMENT 

TEAM, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

TESTIMONY OF C. FORD HEARD III 

Mr. HEARD. Good afternoon, Chairman Coffman, Ranking Member Kuster, and members of the subcommittee. I appreciate the opportunity to discuss the Department’s use of interagency agreements and Federally Funded Research and Development Centers, 

FFRDCs. I’m joined today by Michele Foster, Associate Executive 

Director, Technology Acquisition Center, and David Orso, Executive Director, Office of Policy and Planning, Enterprise Program 

Management Office. 

The Department of Veterans Affairs relies on both internal and 

external contract vehicles to meet its mission of providing the very 

best goods and services for our Nation’s veterans. As the recently 

published GAO report explains, the VA will utilize interagency 

agreements or Federally Funded Research and Development Center support when appropriate to meet these aforementioned needs. 

Interagency agreements for the purpose of the GAO review centered around assisted acquisitions. Assisted acquisitions are those 

where an agency requests the acquisition services of another to satisfy its schedule, performance, and delivery requirements in a manner that is cost effective. 

FFRDCs, the second focus of the GAO review, are independent 

nonprofit entities sponsored and funded primarily by the United 

States government to meet specific long-term technical needs that 

cannot appropriately be met by any for-profit commercial organization. FFRDCs are managed by a nonprofit parent organization in 

accordance with statute and regulation. 

The long-term strategic relationship between the government 

and an FFRDC is encouraged to enable the FFRDC to develop and 

maintain in-depth knowledge of its sponsored programs and operations. VA cosponsors an FFRDC with the Internal Revenue Service through MITRE Corporation, which has five core competencies: 

Strategic management, procurement support and evaluations, program and project management, technical management, and independent evaluation and audit. 

To ensure proper management and oversight of our use of the 

FFRDC, VA established an enterprise-wide executive-level governance structure. The FFRDC Governance Plan provides guidelines 

and procedures for ensuring compliance with the FAR and applies 

to all administrations and staff offices within the VA that seek to 

use the services of an FFRDC. 


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As it relates to the GAO report recommendations, five distinct 

areas were highlighted for VA’s consideration. Specifically, GAO 

recommended VA revise its policies to improve the recording of 

interagency transaction data and to ensure interagency training 

reaches the full range of program and contracting officials. We concur on both of these recommendations and are currently in the 

process of revising our current financial and procurement policy to 

more clearly address recording procedures, as well as developing a 

robust training program designed to mitigate gaps in compliance 

with interagency procurement policy. 

In addressing FFRDCs, GAO substantially validated the VA’s administrative processes and overall utilization of MITRE Corporation. However, they did present three recommendations that they 

believe would provide consistency throughout VA. GAO recommended VA develop a strategy to ensure Department-wide adherence to the Governance Plan, improving support file documentation, and reassessing its approach towards travel costs. We concur 

on all three recommendations. 

As previously stated, VA concurs with the recommendation offered by GAO. We’ve already begun to execute corrective action and 

believe that they will sufficiently address the GAO’s suggestions. 

Mr. Chairman and members of the committee, this concludes my 

oral statement. Thank you for the opportunity to testify before the 

committee. My colleagues and I would be happy to respond to any 

questions that you may have. 

[THE PREPARED STATEMENT OF MR. HEARD APPEARS IN THE APPENDIX] 

Mr. COFFMAN. Thank you, Mr. Heard. 

Ms. Mackin, you are now recognized for 5 minutes. 

TESTIMONY OF MICHELE MACKIN 

Ms. MACKIN. Thank you, Mr. Chairman. Good afternoon, Ranking Member Kuster and members of the subcommittee. I appreciate 

the opportunity to discuss our recent report on VA’s use of interagency agreements and Federally Funded Research and Development Centers, or FFRDCs. 

Interagency agreements can take different forms, but as was 

mentioned, our focus was on those where VA pays a fee to another 

agency to award a contract on its behalf. FFRDCs are not-for-profit 

entities that have a long-term special relationship with government 

agencies. By their very nature, all work to FFRDCs is awarded 

without competition. 

Interagency agreements and FFRDCs account for a relatively 

small slice of VA’s overall procurement spending, a little over $2 

billion from fiscal years 2012 to 2014. But a key component for 

both is oversight and accountability as to where VA’s dollars are 

going. Each also has potential for certain risks that need to be 

properly managed. 

Our key findings with regard to interagency agreements were 

that, first, the full extent of VA’s use of these agreements is unknown. We analyzed data from the Department’s Electronic Contract Management System and found $1.7 billion reported from 

2012 to 2014. But when we did more digging into VA’s accounting 


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system, we found another $600 million to $900 million in potential 

interagency agreements. 

Second, we reviewed 21 interagency agreements in more detail 

and found that almost half were missing required documentation. 

In some cases, this included VA’s reasons for using the agreement 

instead of another contracting mechanism. Because VA is paying a 

fee when it uses interagency agreements, the lack of complete documentation places VA at risk of paying these fees without proper 

oversight. 

And now regarding FFRDCs. Since 2008, VA has cosponsored an 

FFRDC under the MITRE Corporation. It also has a large task 

order with a second MITRE FFRDC. In total, these have a potential value of over $400 million. 

We found that VA has processes in place to review and oversee 

its FFRDC use, but we also found some areas where documentation 

was not as comprehensive as it could be. I’ll mention two key 

areas. 

First, we reviewed 10 task orders and found that in all 10 cases 

VA accepted MITRE’s exact proposed price. In six of these cases, 

the contractor’s proposal was higher than VA’s own cost estimate, 

but we found no evidence of price negotiation, specifically to lower 

the number of labor hours or change the mix of the contractor’s 

staff. 

Further, the contract files did not reflect the factors VA considered in determining that requirements were appropriate for an 

FFRDC. There was no record, for example, of decisions to carve out 

certain requirements that could be competed among other contractors. VA officials said these discussions do happen, but they weren’t 

documented in the files we reviewed. 

A final issue I will note is that while VA’s Technology Acquisition 

Center, or TAC, is responsible for overseeing all of VA’s FFRDC 

use, we found this was not happening in practice. We identified 

four non-MITRE FFRDCs that TAC was not aware of. This means 

that VA organizations were obligating funds to these other 

FFRDCs without the required review and oversight. 

We made five recommendations to VA to address the issues we 

found, and as Mr. Heard mentioned, the Department concurred 

with all of them. We will, as usual, take steps to identify the specific actions the Department is taking. 

This concludes my prepared remarks. Thank you. 

[THE PREPARED STATEMENT OF MS. MACKIN APPEARS IN THE AP- PENDIX] 

Mr. COFFMAN. Thank you, Ms. Mackin, for your testimony. 

The written statements of those who have just provided oral testimony will be entered into the hearing record. We will now proceed with questions. 

Mr. Heard, we had initially invited Ms. Phyllis Bower, Executive 

Director, Office of Acquisition Operations, and Mr. Robert Snyder, 

former Assistant Secretary for Policy and Planning, but they both 

asserted excuses not to attend. Are you the appropriate VA official 

to answer all of my questions today on IAAs and FFRDCs? 

Mr. HEARD. I believe I am, sir. 

Mr. COFFMAN. I certainly expect to hear few answers that are deferred for later or taken for the record. 


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Mr. Heard, in your written testimony, you correctly noted that, 

quote: ‘‘The decision to enter into an IAA is based on the information in the business case, which is the result of market research,’’ 

unquote. Then explain to the committee why the market research 

was so poorly conducted on these matters. 

Mr. HEARD. That’s a vulnerability, sir, and that’s part of the reason why we need to develop a comprehensive training plan for all 

of our acquisition professionals that utilize interagency agreement 

authority for their programs. 

Mr. COFFMAN. Ms. Mackin, how would you characterize the market research related to your report on this matter? 

Ms. MACKIN. I would say it was a mixed bag. We looked at 21 

interagency agreements, and a quarter simply had nothing at all. 

Some others had the words ‘‘market research,’’ but when you read 

it, it was just a statement that VA liked the services the other 

agency was providing or they liked the contractor the other agency 

was using. It wasn’t really robust market research. We did see robust market research in a few cases. 

Mr. COFFMAN. Thank you. 

Mr. Heard, your written testimony mentions that FFRDCs are 

prohibited from competing with any non-FFRDC, and that’s not an 

issue. What I want to know is how VA determined to use an 

FFRDC when there’s little or no documentation that indicates such 

a decision was the best option. 

Mr. HEARD. Sir, I’d like to refer that to Michele Foster, who oversees that process at the TAC for the MITRE contract. 

Mr. COFFMAN. Ms. Foster. 

Ms. FOSTER. Chairman, we use a multidisciplinary team called 

an acquisition integrated product team, whose responsibility is to 

vet the requirements that come forward. The team ensures that the 

requirements fall within MITRE’s core competencies, the five core 

competencies outlined in the GAO report, but they also ensure that 

the work requires a special relationship of an FFRDC. I’d like to 

think that this is a best practice because it’s part of the overall 

governance structure which GAO had actually recommended that 

all of the FFRDCs go through. 

Mr. COFFMAN. Ms. Mackin, can you elaborate on your report that 

explains VA’s inability to justify the use of FFRDCs? 

Ms. MACKIN. It’s really a matter of documentation. Again, there’s 

several key questions that the TAC needs to consider in determining a requirement to be appropriate for an FFRDC because, 

again, we’re in a sole source environment with very broad, closely 

associated with inherently governmental work that these entities 

are allowed to do. 

As was mentioned, in the pre-award discussions we were told 

that this vetting is taking place, but we did not see it in the task 

order files we reviewed, and that was one of the recommendations 

we made to the Department for more transparency. 

Mr. COFFMAN. Mr. Heard, several years ago the VA OIG identified various weaknesses in VA’s oversight of interagency agreements and reported that VA completed various corrective measures 

in 2013 by issuing a new policy on interagency agreements which 

complied with current law and regulations. The GAO report released last week found that VA is still failing to implement its own 


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policy. Why is it taking so long for the VA to correct these problems? 

Mr. HEARD. It’s a good question, sir. The policy that we put in 

place as a result of the recommendations that the IG found were 

based on ensuring that we had more management structure overseeing those acquisitions. These were assisted acquisitions where 

acquisition personnel were somehow disconnected from that process. So putting that back into play, we wanted to make sure that 

acquisition professionals provided a higher level of oversight to 

those contracts. In this case, the IG was identifying vulnerabilities 

in the execution of various contracts that the VA had entered into. 

Today what we’re talking about is ensuring that we’re doing a 

better job in documenting those efforts and a better job in training 

those individuals that perform those duties. This effort is going to 

be multidisciplinary. It’s something that is not just going to be 

done with our acquisition professionals. But as GAO reported, the 

differences with some of the accounting, we are going to ensure 

that our CFO’s office works with us, as well as our own general 

counsel too. 

Mr. COFFMAN. Thank you. 

Ranking Member Kuster, you are now recognized for 5 minutes. 

Ms. KUSTER. Thank you, Mr. Chair. I appreciate it. 

I have the impression that we’re in sort of an Alice in Wonderland world a little bit. I’m having that picture in my mind of the 

Land O’Lakes butter and the little girl is holding the box that has 

her picture who’s holding the box that has her picture. Because as 

you talked about the purpose of these contracts, you started out 

strategic management, the second one was procurement, and I’m 

thinking do we have any sense of whether these contracts are helpful to help VA straighten out their procurement policy. So it’s getting a little circular in my brain here. 

But one of the questions that I have, given these GAO recommendations, can you talk, either Mr. Heard or Ms. Foster or Mr. 

Orso, about training? How are we going to solve this going forward? How are we going to do better to make sure that not just 

the veterans get better service, but the balance that our committee 

constantly has, that the taxpayers are getting what they’re paying 

for as well? 

Mr. HEARD. Yes, ma’am. Best solution to many of our problems 

is our ability to provide training. As a Department, we have the 

benefit of having a very robust training program at our VA Acquisition Academy. I believe some members and staff for the subcommittee has visited that organization up in Frederick, Maryland. 

That’s a delivery. That’s where we plan to deliver some of our efforts, whether it’s face to face or perhaps online. But that is 

our—— 

Ms. KUSTER. And what would you—— 

Mr. HEARD. Yes, ma’am. 

Ms. KUSTER. I don’t mean to interrupt. Our time gets limited. 

What would you do differently about—because it’s not just a question of documentation, right? I mean, that’s what we’re picking up 

on. But what we’re really concerned about is the value proposition. 

How are you going to change the training so that the individuals 

that are making these decisions and making these analyses about 


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the contracts are getting what we need, which clearly is strategic 

management, procurement, all the five steps that you talked about. 

Mr. HEARD. Well, those five steps are within the core competencies of the FFRDC. Our interagency agreements for assisted 

acquisition services is more of a reliance on another agency that 

may have expertise in a certain type of procurement, whether it’s 

for a management skill, an engineering skill, a developmental skill, 

a training skill. As an organization, we may see that might be the 

best suitable solution for the Department. 

And so when we look at interagency agreements, we also look at 

interagency agreements as a form of an assisted acquisition service, and we also look at it as a form of a transference of funds for 

services that the VA may be responsible to pay for. That’s why we 

see in some respects the large delta between how much has been 

obligated and then how much is in our contract writing system. 

Ms. KUSTER. So that gets to my next question. My understanding 

is in the past the VA transferred millions of dollars under just one 

of these interagency agreements. This was the OPM. And the 

money actually, and I believed it was millions of dollars, sat unobligated for more than 2 years. What controls either had been put in 

place or will be put in place? 

Part of what we need to do as Members of Congress is we’re bean 

counters. We’re trying to figure out—tomorrow your colleagues are 

coming to us for $3 billion. Where I come from in New Hampshire, 

that’s real money, where I’m from. And I don’t want to lose $2 million sitting around in some office over here that was unobligated 

because somebody lost track of it. 

So I understand the theory behind the interagency and somebody 

else has expertise in a different part of the government. At this 

point, it concerns me because that’s just—the money’s running 

even further out from what limited controls seem to be in place at 

the VA central. So how can we do better to keep track of that, I 

guess I’m asking. 

Mr. HEARD. Ma’am, that is a very specific issue that I don’t feel 

equipped to talk about today. I would like to take that for the 

record so that is based on an IG report—— 

Ms. KUSTER. Sure. 

Mr. HEARD [continuing]. And so that we can bring back remedial 

action for that. 

Ms. KUSTER. How about if we skip the detail of that particular 

one, just assure me, give me some assurance that going forward 

we’ve got some new procedures in place to keep track. 

Mr. HEARD. Yes. And part of it is our policy on our use of electronic contract writing system. Part of it is our training. Part of it 

may be also to relook at our policy and make it more of an overall 

or overarching review of our internal controls. 

This is a serious problem and we recognize that. I’d like to say 

that it was—it would be an easy fix just to say that we have to 

make some changes in a policy letter and then put out a training. 

But we have to make sure that the training hits home. 

So that, frankly, I’m sad to say that when I read the GAO report 

I see management issues, where an individual who doesn’t feel 

comfortable doing an acquisition of this nature feels that they’re 

stuck doing it. We want the best people that have the knowledge, 


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experience to do these contracts, and that’s what we want to be 

able to move forward with. 

Ms. KUSTER. Thank you. 

Thank you, Mr. Chair. 

Mr. COFFMAN. Thank you, Ranking Member Kuster. 

Mr. Huelskamp, you’re recognized for 5 minutes. 

Mr. HUELSKAMP. Thank you, Mr. Chairman. And I must note 

and report, for my 8-year-old this is probably the highlight of his 

summer to be in your subcommittee, Mr. Chairman. And he was 

going to take notes, but it’s all being recorded. But thank you for 

calling this hearing. He is still awake, I’ll report that. We haven’t 

been here long enough. 

But thank you for coming here. And I think we’re hearing here 

what we hear in so many other hearings, is it’s either the lack of 

data or lack of belief in the data. And on this contracting issue, it’s 

probably some of both as we look at that, Mr. Chairman. 

But one response, I think that was from Mr. Heard, and I wanted to repeat that. You mentioned something about the CFO at the 

VA was going to help us figure this problem out. Could you restate 

that and explain your answer there? 

Mr. HEARD. Sure. And it was regarding training. And we see that 

the training here is really a concerted effort among three primary 

organizations. And when I say primary, I think the fourth is also 

our acquisition workforce. But this is actually a responsibility of 

the CAO, Chief Acquisition Officer, the CFO, Chief Financial Officer, and the general counsel. 

And when I talk about the Chief Financial Officer, there are 

rules on interagency agreements and interagency transference of 

funds, and that’s where we see a lot more money being expended 

because it’s not just about interagency agreements for assisted acquisition services. And that is one of the focuses that I have. That’s 

some of the exposure that GAO identified in their report. 

Mr. HUELSKAMP. Mr. Chairman, that’s what troubles me here. I 

guess we’re going to hear from the CFO maybe tomorrow, or data, 

that’s going to explain how he came, he or she came, $2.5 billion 

short, and we’re just entering the fourth quarter of the year. And 

this is the individual that was charged with tracking them, and 

somehow they’re going to fix our training problem. 

But aren’t there policies already in place that requires this? And 

why is the VA not following clear policies of, I think, the entire 

Federal Government? 

Mr. HEARD. Sir, if I could clarify one point. What we report or 

what’s seen for assisted acquisitions, that’s in our contract writing 

system. That’s really a subset of how much money is being spent 

overall in inter- and intra-agency expenditures or transactions. So 

our focus there is what our contracting officers use to build interagency agreements to support assisted acquisition services from 

other agencies. 

Mr. HUELSKAMP. And so why do you not—the GAO estimates that between $600 million and $900 million worth of assisted acquisition obligations in the VA’s accounting system were not reported on eCMS, despite the requirement. Explain why you’re ignoring the requirement. Is that your responsibility, then, Mr. 

Heard? 


VACREP0180 with DISTILLER
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Mr. HEARD. It is my responsibility, but what I’m saying, that 

delta is not in our eCMS contract writing system. It is not an accounting system. It’s a system that we use, using—— 

Mr. HUELSKAMP. So that’s not a requirement to be in eCMS, or 

it is? 

Mr. HEARD. Only for assisted acquisition services it is. 

Mr. HUELSKAMP. So everything on assisted acquisition services is 

in eCMS. 

Mr. HEARD. Should be in eCMS. 

Mr. HUELSKAMP. No, is it in eCMS? Did the GAO say it was all 

in there? 

Mr. HEARD. I don’t know. 

Ms. MACKIN. We identified that $600 million to $900 million in 

potential interagency agreement obligations that should be captured in eCMS. We all know there’s been a history of data reliability problems with the contract system. In fact, we found it not 

to be reliable for our purposes. So we recommended that VA do 

some spot checking with the accounting system to see if those are 

assisted acquisitions or the other type. 

Mr. HUELSKAMP. Now, in 2009 the GAO made this recommendation as well, and if I understand it correctly, 5 years later, followup, those recommendations were never implemented? 

Ms. MACKIN. I believe that was an IG report. As I said, this most 

recent review we could not rely on eCMS for our purposes. 

Mr. HUELSKAMP. Mr. Heard, any response for 5 years versus 

where we are today, which apparently little or no change? 

Mr. HEARD. From a technical standpoint, sir, that there’s been a 

considerable amount of change to make eCMS perform better. 

Those changes occurred in 2012-2013 timeframe, and we are very 

pleased with the success that we have and the utility it offers. 

It does not change the fact that back in 2009, and somewhat 

later, that there were areas of missing data, lack of support to our 

organization. But the fixes that have been put in place have 

showed some dramatic change in its utility across the Department. 

Mr. HUELSKAMP. Mr. Heard, one last thing, and maybe you need 

to answer that for the record, but I see a reference to one particular entity maybe pulled out as an example, something called 

the MITRE Corporation. And GAO reviewed 10 task orders to them 

and found they were all missing documentation. Do you have any 

quick explanation of why they don’t have to follow the rules or your 

relationship with them? 

Mr. HEARD. Sir, I would like Michele Foster to answer that question for you. 

Ms. FOSTER. Sir, as it relates to the missing document, it was our 

understanding that the report was highlighting that during the 

AIPT process what we’re doing is when we’re vetting whether the 

requirements are right for MITRE or perhaps for just a commercial 

entity, that discussion, all of the participants, that multidisciplinary team, they’re all taking notes, minutes on the discussion, 

but they weren’t putting anything formal in the record, in the contract record. 

What was going in the record was once they settled on that piece 

that was appropriate for MITRE, that’s what was going in the 

record via an R&J, a requirements and justification document. But 


VACREP0180 with DISTILLER
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the explanation of how it got there, that was missing from the file. 

But as far as the FPDS system, all of the obligations for the 

FFRDC were found to be within that system. 

Mr. HUELSKAMP. And lastly, could you provide that to the committee, that missing documentation that would answer the GAO 

concerns? 

And with that, I yield back, Mr. Chairman. 

Mr. COFFMAN. Thank you, Mr. Huelskamp. 

Mr. O’Rourke, you’re now recognized for 5 minutes. 

Mr. O’ROURKE. Thank you, Mr. Chairman. 

Mr. Heard, I appreciated you beginning by saying that you concur with the findings and the recommendations, and you then said 

that you’re working on policy and training programs to come into 

compliance. How long before you will be where you should be and 

where the GAO can come back to us and say clean bill of health 

for the VA on these issues that we uncovered? 

Mr. HEARD. Congressman, I don’t have our timeframe. But from 

a management standpoint, it is managed through our Chief Acquisition Officer. So we will be reporting on a routine basis to him, 

Greg Giddens, on our status. 

Mr. O’ROURKE. Can I ask you a question? Did you not, after 

reading this report, meet with whoever’s responsible for correcting 

this and say: ‘‘I want to get these things done by this date,’’ or, 

‘‘Here are the issues. When can you get them done? Great. Here’s 

the commitment.’’ Did that take place and you just don’t happen 

to have that date with you today, or have you not had that conversation? 

Mr. HEARD. We have not had that sit down. We had the—— 

Mr. O’ROURKE. It would be a good thing to do, right? 

Mr. HEARD. Yes, sir. 

Mr. O’ROURKE. Yes. When do you plan on having that conversation at which you will establish the deadline that you will commit 

to and bring back to us so that we can hold you accountable for 

that? 

Mr. HEARD. We’re going to organize that meeting next week. 

Mr. O’ROURKE. Okay. Appreciate that. 

Do you know for the last fiscal year what the total in fees paid 

through the IAA program is? 

Mr. HEARD. I do not know, sir. 

Mr. O’ROURKE. Does the GAO happen to know? 

Ms. MACKIN. We don’t know that either, because in the files it 

didn’t always indicate what the fee was. We know it ranged from 

2 percent to about 14 percent, with the average around 5 percent. 

But I don’t have dollar figures. 

Mr. O’ROURKE. And is there a way to extrapolate based on those 

averages and say we think this much went through and these were 

the average percentages paid and so it could be this? 

Ms. MACKIN. I actually asked my staff to look into this very 

question in preparation for today, and we just couldn’t get there 

with the documentation that was in the files. 

Mr. O’ROURKE. Okay. 

So, Mr. Heard, I’ll ask for that number for the record, and I don’t 

know if the chairman knows, but you have so many days. 


VACREP0180 with DISTILLER
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Or is there a deadline for witnesses to get back to us? Okay. 

Great. There’s a deadline for us to ask the questions for the record. 

Okay. 

So we’ll just ask that question today, ask that you get back to 

us within a week. 

Mr. HEARD. We will. 

Mr. O’ROURKE. Okay. Appreciate that. 

On trying to put this into context, another question for the GAO. 

Do you or your colleagues at GAO see similar problems in accounting and reporting in other agencies or departments? Is this a problem through the Federal Government, or do we find this to be pretty specific at the VA? 

Ms. MACKIN. Actually, we do find it across the government. Almost every time we do a deep dive on any contracting issue we find 

data errors. And interagency agreements were actually on GAO’s 

High Risk List for almost 10 years because of the risk of out-ofscope work, lack of competition, unauthorized work, and the fees 

that are being paid. So these issues are not limited to VA. 

Mr. O’ROURKE. And then I have a question both for you and for 

Mr. Heard on a specific example that is used to illustrate the problem in your report, and it’s the Defense Logistics Agency, where it 

turns out VA was paying a percent more than they would have if 

they had used their own acquisition agency. And it wasn’t—I don’t 

know if it was uncovered until you uncovered it. 

What I want to get at is, do we know what the total cost of that 

was to the taxpayer, the difference, that 1 percent? What did that 

amount to? 

Ms. MACKIN. That was a $60,000 per year saving to VA, taking 

it from DLA and bringing it in-house. 

Mr. O’ROURKE. And for how long was that contract in place? 

Ms. MACKIN. This contract had been in place with DLA since 

2008. And when DLA raised its fee from 2 to 2.5 percent, which 

equated to $140-some-odd-thousand per year, that’s when the VA 

people started asking questions about the basis for the fee increase. 

So they did recognize it and start looking into it at that point. 

Mr. O’ROURKE. So DLA should have just kept their fee the same. They could have kept that $60,000 in their pocket. 

Ms. MACKIN. I guess so. 

Mr. O’ROURKE. Another question on the numbers and the scope. 

Do we know how many instances—is there any way to know how 

many instances like this DLA one occurred over the last so many 

years and what the total cost to the taxpayer was? In this case it 

was $60,000 a year. 

Ms. MACKIN. It’s a legitimate question. As I said, I looked into 

this in preparation for today, and based on the information we saw 

in the files, we can’t get there in every single case. This one just 

happened to be clear cut enough that we could quantify the impact. 

Mr. O’ROURKE. And, Mr. Heard, is that an answerable question? 

Does the data exist for you and your team to go back and find out? 

Mr. HEARD. It would be difficult to mine. But a perspective to 

share is that DLA, like GSA, like many other organizations, including the VA, may use, rather than appropriated funds, revolving 

funds to manage these types of contracts. And that revolving fund 

is money to bring back to cover its cost of operations. And so not 


VACREP0180 with DISTILLER
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knowing what the 2.5 percent is, and I actually don’t know what 

the commodity is, there’s a business sense behind that percentage. 

Mr. O’ROURKE. Okay. I don’t know if I understand that, but if 

there is the ability to, for the committee, document total lost opportunities or costs borne by the taxpayer that were unnecessary because you could have acquired it in-house like this DLA example, 

I’d love to know it. But if not, this DLA example I think is illustrative of the problem that you have there. And just the fact that 

it’s unknowable, I think, invites additional skepticism. So I think 

it’s within the VA’s interest to answer that if you can. 

I yield back to the chair. 

Mr. COFFMAN. Thank you, Mr. O’Rourke. 

Ms. Walorski, you have 5 minutes. 

Ms. WALORSKI. Thank you, Mr. Chairman. 

I just am sitting here thinking and kind of associating myself 

with the comments from our ranking member about the fact that 

we’re going to be sitting in a hearing tomorrow with the VA Secretary, and I think to much of our surprise, asking the question 

and listening to the testimony as to how in the world we are $2.5 

billion, $3 billion off all of a sudden in the context of the VA. And 

then we sit here today and we’re asking more specific questions 

again based on a GAO report. 

And it just surprises me, Mr. Chairman, that we sit here time 

and time again and we hear it, and it doesn’t seem to matter which 

particular entity of the VA is sitting here, but the answers that we 

even get today about these interagency contractual agreements on 

missing data, lack of support, managerial problem, missing documents, no training, and all these things continue to persist. 

And I have got to think that when the American people, at least 

the folks in my district in Indiana, listen to these hearings—and 

they really do, Americans are at the table with their ears on because they’re fighting for veterans just like we are—I think they’re 

so confused and distressed when we hear the kind of answers coming that we’re hearing today. 

And it’s usually always at the impetus of a GAO report. If the 

GAO hadn’t looked into these situations they would never rise to 

the occasion to even be talking about this at a hearing. And I think 

it just adds to the anxiety the country has, the Nation has, as we’re 

all together fighting for veterans, and it seems like we’re fighting 

the very entity that was created to help veterans, and an entity 

that seems to have lost itself in questions that literally no answers 

can be provided anymore, it’s just too big of a mess. 

And so with that—and I think it’s distressing as well, because 

our fellow Americans have made it very clear that they are standing with this bipartisan committee fighting for veterans and trying 

to help do everything we can legislatively. But I think we’ve also 

found out that legislative fixes aren’t going to save the VA. It’s 

going to be the people inside the VA that are going to save the VA. 

And I guess with that I would ask—I think, Ms. Foster, you were 

the one talking about the issue with the MITRE proposal, but the 

GAO found that you always accepted—always accepted—MITRE’s 

price proposal, even when it was higher than your own cost estimate. Why is that? 


VACREP0180 with DISTILLER
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Ms. FOSTER. Ma’am, you have to remember for MITRE Corporation, really what we are negotiating with MITRE, and Ms. Mackin 

mentioned it during her opening testimony, was the labor hours, 

right, and the mix of labor. The rest of it we’re relying on an Air 

Force CACO, corporate administrative contracting officer, to go 

ahead and negotiate with MITRE Corporation on behalf of many of 

the other agencies, the VA included. So the overheads, they’re already given to us, right, so what we’re negotiating is that labor 

piece. 

And what you saw in the report was the contracting officer was 

relying on the technical expert, right, so it’s typically the PM who’s 

giving you the requirement, they’re the expert in that area, looking 

at the labor mix provided by the MITRE Corporation and comparing it to what they had. But what they may have been thinking 

about when they put their independent government cost estimate 

together may not match MITRE initially because MITRE might 

have a different approach. 

So what they do is, and it was listed in the report, the two 

groups sit down together and say: This is what I was thinking, how 

is that different? And as long as that technical expert who’s advising the contracting officer that works for me feels comfortable, they 

go ahead and they’ll accept that position. 

At the end of the day, as the report highlights, it’s a cost-type 

contract, right? So MITRE’s going to get their actuals. So what that 

proposal gives you is a top level ceiling. But ultimately when you 

go to close out the record, what it is that they actually performed 

is what they are going to get paid for except the fee gets lobbed 

on top of that. 

Ms. WALORSKI. Let me ask you this in light of that. Do you have 

some examples of some types of work where the VA has developed 

its own in-house capacity through working with MITRE and no 

longer reaching back to MITRE for support? 

Ms. FOSTER. Ma’am, I’d defer that to Mr. Orso. He’s the business 

office that handles that. 

Mr. ORSO. Thank you, ma’am. 

We have a very robust governance process that looks at the requirements, the out-year requirements. And then as the projects 

are actually accomplished within MITRE, the process that we use 

ensures that they have a plan to scope—down scope or down scale 

their support to any given program. And that’s built in at the AIPT 

level and all of the other activities that we’re placing on contract 

with the vendor. 

Ms. WALORSKI. Do you have specific examples, though, of working with MITRE where the VA’s developed its own in-house capacity without having to reach back to MITRE for support? 

Mr. ORSO. I would have to go bring you something for the record, 

ma’am. I’d have to take that for the record. 

Ms. WALORSKI. Could you do that for the record? 

Mr. ORSO. Yes, ma’am. 

Ms. WALORSKI. I appreciate it. 

And I yield back, Mr. Chairman. 

Mr. COFFMAN. Thank you, Ms. Walorski. 

Mr. Walz, you are now recognized for 5 minutes. 

Mr. WALZ. I’m good, Mr. Chairman. 


VACREP0180 with DISTILLER
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Mr. COFFMAN. Mr. Lamborn, you’re now recognized for 5 minutes. 

Mr. LAMBORN. Thank you, Mr. Chairman. 

Mr. Heard, in the past the VA has transferred millions of dollars 

to OPM under an interagency agreement where the money sat unobligated for more than 2 years. What controls have you put in 

place to ensure this doesn’t happen again? 

And this is a very timely question because we’re going to have 

the Secretary come in tomorrow, I believe it’s the Secretary, and 

say that you need billions of dollars more. And the controls for accounting for where the money goes and how it’s spent seem to be 

lacking. 

So how would you answer that question? What controls have you 

put in place to ensure that this doesn’t happen again with these 

types of contracts? 

Mr. HEARD. Sir, there was a previous question that we did take 

that one for the record. We are going to be providing some very detailed information on what occurred there and what has actually 

happened. 

But if I may add that part of our improvements, maybe more accountability to our policy, was to ensure that contracting professionals, contracting officers, are engaged in those contracts as opposed to having just the program office oversee or manage. We 

want to make sure that we have the right expertise involved in 

those contracts so that they just can’t run amuck or go rogue, as 

we may have seen in the past. 

Mr. LAMBORN. Okay. Thank you. 

Now, when it comes to assessing the contracts and how well they 

perform, how would you assess FFRDC performance and ensure 

that we’re getting—the VA is getting their money’s worth out of 

these programs? 

Mr. HEARD. Sir, if I could, I think we want to answer that both 

with Michele and from David from a program standpoint. So 

Michele can address it from a contracting perspective on performance, and then as a consumer user David can give that perspective. 

Ms. FOSTER. I’ll start, if I may, sir. 

So we monitor MITRE on cost, schedule, and performance, and 

we have several different ways in which we do that. We get monthly progress reports from them, invoice, and we also get the corresponding invoices, right? So the CORs and the contract specialists are reviewing those on a monthly basis. 

We also include a performance-based assessment survey which 

gets used prior to the performance management team monthly reviews, which I believe were mentioned in the GAO’s report as well. 

And of course we rely on the audit services of DCAA to help us 

with that. 

And, David. 

Mr. ORSO. On the program side, sir, we have a feedback loop, a 

mechanism, where from the PMT and from feedback from the program offices in particular, they’ll either come to the EPMO, my organization, or Michele’s organization, and Ms. Foster and I have a 

weekly call in which we discuss the performance of the contractors 

or the vendors, in this case the FFRDC. And where there is—if 

there is an issue, we will address it accordingly. 


VACREP0180 with DISTILLER
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So the program offices that are being provided the support have 

routine check-ins with either my staff or Michele’s staff in various 

capacities. 

Mr. LAMBORN. Okay. Thank you. 

And, Ms. Mackin, I have a question for you now. By their very 

nature, FFRDC contracts are noncompetitive. Is VA at risk of paying too much for FFRDC work that could potentially be competitively awarded? 

Ms. MACKIN. I think any time the government’s in a sole source 

environment they have a weakened negotiation position in terms of 

setting the prices. So I would say for any sole source arrangement 

that that’s a risk. And that’s why we hope that VA, in agreeing 

with our recommendation, will document their decisions to carve 

out certain requirements that can be competed. They’ve looked at 

this in the past, in 2012, for example, and saved $7 million in 

doing so. So we think that has to happen routinely to save money 

for the Department. 

Mr. LAMBORN. Okay. Thank you. 

Mr. Chairman, I yield back. 

Mr. COFFMAN. Thank you, Mr. Lamborn. 

Ms. Mackin, we have heard allegations that VA has even compensated MITRE for performing market research for its own proposals. Is that true? 

Ms. MACKIN. I don’t have any information on that. 

Mr. COFFMAN. Okay. Mr. Heard, that is true? 

Mr. HEARD. I am not familiar with that. You know, I can ask 

Michele to maybe opine on that, you know, based on her oversight 

to that contract. 

Ms. FOSTER. Sir, it wouldn’t surprise me. I’m thinking of one situation actually almost a year ago where MITRE was asked as it 

related to Section 101 of the Choice Act to help with market research. Unfortunately I wasn’t the contracting organization that 

was doing the Section 101 work, but if I recall correctly, they were 

trying to determine, the contracting office was trying to determine 

if the PC3 contract would be appropriate to meet the needs of Section 101. And so MITRE was asked to help when they were going 

to have an industry day, I believe, was the case. 

And so it is not uncommon, certainly in my world in IT, if you’re 

going to have an industry day and you’re trying to determine who 

has technical capabilities, to invite a technical expert to that meeting; so I suspect that is why MITRE was invited to that particular 

one, and that would have been considered the market research. 

Mr. COFFMAN. Ms. Mackin, if we add up the amount GAO identified for interagency agreements, as well as the FFRDCs from fiscal 

year 2012 to fiscal year 2014, it is over $2 billion. How would you 

characterize the risk VA faces with this amount of money given the 

problems you found? 

Ms. MACKIN. I think there is the potential for significant risk. As 

I mentioned, interagency agreements were on our high-risk list for 

10 years almost. And because of the potential for out-of-scope work, 

unauthorized work, lack of competition, and paying too much in 

fees, FFRDCs, again, you are in a sole-source situation where this 

contractor is authorized to do work that is very closely associated 


VACREP0180 with DISTILLER
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with inherently governmental work. So this is why both of these 

need to be very closely monitored and overseen. 

Mr. COFFMAN. Well, I think the tragedy here today is this is an 

organization, the Veterans Administration, really in crisis. You 

know, and I think, you know, we’ll have, we’ll call you back 3, 4 

years from now, or whoever is sitting in this chair; and, of course, 

the principals won’t show up. They will have some underlings show 

up who won’t be able to answer all the questions, and it’ll be the 

same thing. We will try harder. And, you know, I’m confident nothing will occur. 

And what is amazing to me is here is an organization in crisis 

that suffers from a lack of accountability and transparency, and 

here we are adding another layer of unaccountable, you know, not 

transparent, you know, acquisition people who are a nonprofit, 

structured as a nonprofit, sole source outside the Veterans Administration. I mean this just compounds the kind of problems that we 

have here. These FFRDCs, these folks need to go by the wayside. 

I don’t see any—You know, you all need to up your game in terms 

of acquisition, and I know that that is probably never going to happen; but, you know, it is not going to work out anyway. 

I am just not optimistic right now, given the leadership that the 

VA has at the very top. The President is not engaged. The Secretary of the VA is not engaged in making a difference. You all are 

just placeholders until somebody does want to make a difference, 

and I don’t know how long that is going to take. 

Ranking Member Kuster. 

Ms. KUSTER. Thank you, Mr. Chair. I wanted to follow up from 

where Ms. Mackin just left off. And if anyone has a response, it is 

fine by me. 

I want to get at this role of MITRE and whether it is always an 

appropriate role, and I see that the VA has a committee that reviews potential FFRDC work before it is offered to MITRE. Does 

anyone in the panel know if this committee ever finds that something isn’t appropriate for this? 

Ms. FOSTER. Ma’am, I can take that question. So that was the 

acquisition integrated product team that I mentioned in the beginning, right, so they are the ones that are vetting those requirements. I am going to give you an example. So a requiring activity 

would come to this team, and legal is on there also. There is a couple of attorneys on there, my staff, Mr. Orso’s staff and, of course, 

the person who wants to use MITRE. Right? 

So one example was an organization came in and they wanted 

organizational change management support from a strategic direction trying to transform their part of the organization. So, yes, that 

piece would be appropriate when you look and see the details of it; 

but then there was another piece where I think in this case they 

were looking to do some database development as part of that, and 

the group that got it on the organizational change management. 

That other piece, that gets carved off. 

Now we recognize that ultimately the veteran is going to be the 

benefactor of all of these things, so we don’t just say that piece gets 

carved off and you are on your own. If we know of other existing 

contracts that are in place, whether my organization or a different 

one, then we’ll shepherd that over to those organizations that can 


VACREP0180 with DISTILLER
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go ahead and execute. And this is the piece that the GAO rightly 

said, you know what, that discussion needs to be for the record, 

and it was missing. 

You know, people were taking their own notes, their minutes of 

it, but it wasn’t making its way into the record. The only thing that 

was as it relates to that discussion was ultimately in this case if 

you settle on organizational change management, fine, that was 

justified, but not the stuff that didn’t make it. So I hope that helps. 

Ms. KUSTER. And do you identify instances where the VA should 

do the work? In other words, I’m concerned about instances where 

MITRE is performing work that is inherently governmental in nature that the VA could be performing? I mean, in other words, 

we’re as Members of Congress, appropriating dollars to pay salaries 

for people that we’ve hired with the expertise to do a particular 

type of work. 

Now it may not be the changes in management style, which probably would be very helpful at the VA, but are there other pieces 

of this, and maybe this is what you are referring to, in a carve out? 

Is that something, the database piece is something that could be 

done in-house? 

Ms. FOSTER. So I will let Mr. Orso talk to that piece. Go ahead, 

Dave. 

Mr. ORSO. Thank you, Michele. 

Ma’am, Ranking Member Kuster, so the way that the process 

works, there is another layer that we should talk about to make 

this clear. At the executive level across every business line, we 

have representatives to bring their out year requirements to a 

forum in which we review them for consideration and to plan, and 

we can look at them across the agency and integrate those requirements in a very comprehensive way. And that in and of itself is a 

huge mechanism for savings and for integrating activity. 

Those recommendations as they’re brought forward go to the 

FERC, what we refer to as the FERC—it is the next level up; it’s 

the highest level of leadership within VA below the Secretary really—and they validate those requirements, which then the business 

owners, the program managers, those folks, will plan for in the out 

years. 

Now, when those requirements are developed and procurement 

packages are created, they’ll go through a vetting process where a 

business line is going to determine whether he or she has the capacity within his organization to perform some of those activities 

on his own with his own staff, government FTE, or whether it 

should be—potentially go to the FFRDC, as had been planned. 

I will give the example of the My VA activities; those things were 

not planned. So they’ve come out, and we are responding to those 

as they are emerging from the initiatives themselves. However, the 

consideration is still made for whether or not it is appropriate for 

the FFRDC or should it be a commercial vendor. That happens at 

the AIPT. 

I would add that as far as the expertise goes, so My VA in particular is a monumental undertaking. Clearly we have a huge organization dispersed across a Nation in pockets of places. I mean, it’s 

a tremendously difficult thing to change and to integrate. And that 

is really what the Secretary is trying to do, is to deliver an inteVerDate Aug 31 2005 08:10 Oct 13, 2016 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 Y:\98-688.TXT PAT

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grated enterprise that supports the veteran with the veteran at the 

center of our business model. We don’t—— 

Ms. KUSTER. Are you trying to say that the My VA has been 

done by FFRDCs? 

Mr. ORSO. Ma’am, let me clarify. 

Ms. KUSTER. Thank you. 

Mr. ORSO. We certainly have some support from the FFRDC 

within my VA; but, yes, that is being run by the government, by 

Mr. Snyder is the executive director. 

But the point I am trying to make is it is a very complex effort 

that we don’t have the expertise to carry out or the capacity in 

some cases. And it would not be appropriate for a commercial vendor in most of these cases to support us in those efforts. And the 

reason really is because it would create a conflict of interest where 

they could come back on the execution end of the planning and 

have an insight into what we were already attempting to do; and 

they would have an increased position to receive that award because of the information they had received or been a party to. 

So in my view, the governance structure that we have in place 

is about as effective as it could possibly get. I do realize there are 

some gaps that GAO has identified. But from a balancing of resource perspective, this is a very solid governance system, ma’am. 

Ms. KUSTER. All right. Well, I appreciate that. My time is well 

past, but I think we will bring this up tomorrow with the Secretary 

to see if he agrees with your assessment, as he is coming forward 

to ask for these extra funds. So thank you, Mr. Chair. 

Mr. COFFMAN. Thank you and you can always contract out with 

acquisition consultants on a competitive basis versus a Soviet-style 

system. 

Dr. Roe, you are now recognized for 5 minutes. 

Dr. ROE. Thank you, Mr. Chairman. 

I am sorry I had to leave. I had to go to the House floor to testify 

on a VA bill. So I missed some of the testimony. And I am going 

to back up a little bit and just ask a few questions. 

So someone can walk me through, how is the FFRDC, how and 

why and when is it used? It’s as simple as that? I want to ask that 

question first. 

Mr. HEARD. Sir, we’ll do that as a two part. We’ll talk about it 

as a contracting point, the rigors of that decisionmaking—— 

Dr. ROE. Walk me through why you would need them at all. 

Mr. HEARD. Okay. Go ahead. 

Ms. FOSTER. Sir, we talked about, especially in this particular 

FFRDC, MITRE Corporation. We mentioned the five core competencies—— 

Dr. ROE. I heard that testimony. My question is just give me an 

example of where they would be used. Why would the VA need to 

use this organization? 

Ms. FOSTER. Okay so that goes to the special relationship, sir. 

They are expected to give us an unbiased opinion, right, where 

they are not going to have any conflicts of interest in the back end. 

So for example, in my own office, right, we have a big acquisition 

called T4 NextGen. Well, as it relates to portions of it, we are using 

MITRE Corporation to help us with some of the technical evaluations. 


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Dr. ROE. Is that a private corporation, private company, MITRE? 

Ms. FOSTER. MITRE Corporation. It is a federally funded research and development company. 

Dr. ROE. Okay. It’s federally funded then, okay. 

Mr. HEARD. It’s a nonprofit, sir. 

Dr. ROE. Okay. But Federal dollars flow to that. Correct? 

Ms. FOSTER. Right. 

Dr. ROE. Go ahead. I’ll let you finish. 

Ms. FOSTER. So that would be an example because they are not 

going to be competing for that work. They don’t have any skin in 

that game, if you will. There won’t be any conflicts of interest. So 

we are relying on their technical expertise to help us to go ahead 

and make the right decisions as far as who is going to be winning 

that competition—— 

Dr. ROE. Well GAO indicates that maybe that is not happening. 

At least from the GAO report that I read, that maybe that isn’t 

happening right now. 

And the FFRDC, who do they report to? What is their chain of 

command, and where are they located in the Federal Government, 

what department? 

Mr. HEARD. They; re a nonprofit organization. 

Dr. ROE. So it is a nonprofit, outside the Federal Government? 

Mr. HEARD. Yes, sir. 

Dr. ROE. Okay. So it is a federally funded—— 

Mr. HEARD. Right. 

Dr. ROE [continuing]. Outside, and again with the choice—the 

chairman just said, and how long have they been in existence? 

Mr. HEARD. They are a contracting authority under the Federal 

acquisition regulations. 

Dr. ROE. Okay so they are a contracting authority then. 

Mr. HEARD. And they have been in existence for many years. I 

can take it for the record to give you maybe a sheet, fact sheet, on 

FFRDCs if you would like. 

Dr. ROE. Yeah. I guess the reason I am trying to understand is 

exactly what their purpose is because there is another way you do 

this. I have been in public service before I got here, and we didn’t 

use anything like this complicated to get a contract done. 

I mean there’s a way to get a contract. You have basically whether you are building something or whether it is a technical service 

or whatever, there is a way to bid those out, unless this is just a 

consultant that you use. Is that basically what this is? A consulting 

is you’re asking their opinion? It is a pretty expensive opinion, I 

think. 

Mr. ORSO. All right, I’ll take that. I’ll try to respond to that, Mr. 

Roe, sir, if I may. 

So I represent the programs in VA, or the business as we would 

describe it. And with the FFRDC, what they really provide is, if we 

are building something new, the program structure maybe that 

would have performance requirements, and let’s say it is a large acquisition that we are looking for, a large new program. 

The FFRDC folks would help us think through those requirements in a way that we could operationalize or execute them. But 

the execution of that, the development of those things, would be 

given to a commercial vendor to satisfy the thinking, the planning 


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portion of that, the generating of the ideas and how it would be 

best resolved. They would assist us with those types of things. It 

depends on the type of requirement. They have competencies—— 

Dr. ROE. So basically they are a consulting—is that what they 

do? 

Mr. ORSO. I would say, so they are very sophisticated consultants, yes, that have a special relationship with us, and they can 

have access to information that we wouldn’t give to a commercial 

vendor. Because that commercial vendor would have an unfair advantage when it came time to execute or to bid on the contract that 

was going to result from that development activity. 

Dr. ROE. So what you are saying is they’re supposed to be an unbiased observer that looks at whatever you, and gives you an unbiased opinion. Is that correct? 

Mr. ORSO. That’s a great way to describe it, yes, sir. 

Dr. ROE. That’s what they are supposed to do. How many people 

work there? What kind of budget do they have? And is this for all 

of government? 

Mr. ORSO. So I think—— 

Ms. FOSTER. Sir, it’s a very large corporation, and MITRE Corporation supports many of the agencies certainly, Army, all of DoD, 

Treasury, IRS. We have a—— 

Dr. ROE. They weren’t involved in Aurora, were they? Did they 

have anything to do with any of that? 

Ms. FOSTER. I don’t—sir, I couldn’t—— 

Dr. ROE. Do you know, I mean seriously, were they? 

Ms. FOSTER. Yeah. That we would have to take back. 

Dr. ROE. I would like to have that answered because if they 

were, they need to be fired, whoever was there. 

Ms. FOSTER. Okay. 

Dr. ROE. I yield back. 

Mr. COFFMAN. Thank you, Dr. Roe. 

Mr. O’Rourke, you are now recognized for 5 minutes. 

Mr. O’ROURKE. Thank you, Mr. Chairman. 

Mr. Heard, how would you respond to additional budget pressure 

related to these two programs, the federally funded research and 

development program, and these interagency agreement programs? 

I don’t know what is going to happen at tomorrow’s hearing, and 

I don’t know what is going to happen with this $3 billion budget 

shortfall, but if the Secretary comes back and says I need to find 

these kinds of savings across the board throughout the department, 

how would that change your view of how essential FFRDCs are 

and these additional fees that you are paying on these interagency 

agreements? In other words, are there savings there? How would 

you respond to that? 

Mr. HEARD. It could have a significant impact on the performance of those agreements. If we had to look at it from that budget 

perspective, you know, at this point it’s part of the budget, the execution. 

But if those savings were to be found, you know, VA would be 

looking under rocks to find where those dollars can be found, and 

that could have an impact on those programs as well. 

Mr. O’ROURKE. Yes. And I appreciated the comments earlier 

about the larger context in government, and we have these 


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FFRDCs that serve other Federal departments and agencies. We 

have some of these similar issues in other agencies and departments. And certainly—I also sit on the Armed Services Committee. 

Lots of examples there where we overpay and don’t get perhaps the 

best bang for taxpayer dollars. So. 

But today we are focused on the VA, and tomorrow we are going to hear about this $3 billion shortfall. And I have got to think that 

not knowing the total value of fees paid or just in that one $60,000 

annual example that the GAO uncovered, that if we extrapolate 

might be much, much larger than that, perhaps there is not 

enough pressure today to uncover savings or check these contracts 

or even know if we have contracts in place, as the chairman has 

helped us uncover in other hearings. 

So that is just, I guess, a point I would like to make and a question I would like for the VA to think about, which is, certainly Congress could appropriate more money or shift money out of a program like Choice to fund a budget shortfall, but perhaps there are 

savings within agencies and departments under VA right now, including in these fees that we’re paying in these FFRDCs; and it is 

hard to get a concise, compelling answer from you or Ms. Foster— 

and it may just be a difficult, complex issue to articulate—about 

the value of them. And why are we paying this much? And what 

of that could we bring in-house? And what is essential and what 

is not when we are facing these shortfalls and have these other crises in the VA. 

So I appreciate your answers, and I am looking forward to the 

two things you committed to me within a week on the record, your 

deadline that we can count on and hold you accountable for, for fixing these problems, and then the total paid in interagency fees 

within the last fiscal year. And I have your commitment to get 

those within a week? 

Mr. HEARD. We had two issues, and the one was the fees paid 

for it. To the best of my knowledge, we are looking at those that 

came up through this interagency agreement, review by the GAO, 

the audit that they conducted. So we are going to go back to each 

one of those contracting organizations and ask them to extrapolate 

those fees based on the total costs associated with those agreements. 

Mr. O’ROURKE. I would like to know all fees. What does this cost 

the VA annually? And the thing that I don’t think we could get to 

but I would love to know is, how many examples like that 1 percent extra, $60,000 a year in that one contract, are we seeing? 

And the other was just your deadline, your commitment for we 

will fix and address and be where we want to be per the GAO’s 

findings by this date. 

Mr. HEARD. Sir, my commitment there was by next week I will 

have that meeting scheduled with all those parties. 

Mr. O’ROURKE. Got you. When do you think you could come back 

to this committee, either in person or writing, and tell us what the 

deadline is? 

Mr. HEARD. I would really like to have at least 2 weeks after 

that meeting. I think that is very, very important. 

Mr. O’ROURKE. So by September 1? 

Mr. HEARD. Yes. 


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Mr. O’ROURKE. We would have a commitment from you I’m going 

to fix these—— 

Mr. HEARD. By said date. 

Mr. O’ROURKE. I appreciate that. Thank you, Mr. Chair. 

Mr. COFFMAN. Mr. Walz. Okay. 

Today we have had a chance to hear about problems that exist 

within the Department of Veterans Affairs with regard to oversight 

of its interagency agreements and Federally Funded Research and 

Development Centers. 

This hearing was necessary to identify the continuing widespread 

problems with VA procurement and to allow VA to provide answers 

as to why these problems persist. As I mentioned in my opening 

statement, VA has informed the committee that it has run out of 

money, which may result in its need to close VA medical centers. 

To that end, VA has told the committee that it will need an additional $3 billion. 

Based on evidence and testimony provided in our four recent procurement hearings, VA misspent or plainly cannot account for 

around $7 billion annually, over twice the shortfall caused by VA’s 

poor stewardship of money intended to provide services to veterans. 

As such, VA must be held accountable for the sheer incompetence 

that has somehow led to its squandering these funds needed to give 

veterans the care they deserve. 

I ask unanimous consent that all members have 5 legislative 

days to revise and extend their remarks and include extraneous 

material. Without objection, so ordered. 

Mr. COFFMAN. I would like to once again thank all of our witnesses and audience members for joining in today’s conversation. 

With that, this hearing is adjourned. 

[Whereupon, at 5:18 p.m., the subcommittee was adjourned.] 


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APPENDIX 

PREPARED STATEMENT OF CHAIRMAN MIKE COFFMAN

Good afternoon. This hearing will come to order. 

I want to welcome everyone to today’s hearing titled, ‘‘Lack of Oversight of Interagency Agreements—VA Procurement Failures Continued.’’ This hearing will examine serious problems with VA’s use of Interagency Agreements to procure certain 

services and will also focus on Federally Funded Research and Development Centers 

(which we will refer to as FFRDCs for ease of reference). 

Interagency agreements, in this case where other agencies may contract or perform services for VA, can be an efficient procurement method. However, these acquisitions may pose a variety of risks, in part because of the need for stronger internal 

controls and clear definitions of agency roles and responsibilities. As we will see 

today, and we have seen with VA for years, internal controls, management, and 

oversight are tremendous problems for VA. 

Additionally, VA has relationships with FFRDCs, privately owned but government-funded entities, that have long-term relationships with federal agencies intended to meet special, long-term research or development needs that cannot be met 

as effectively by existing in-house or contractor resources. FFRDCs are granted special access, beyond that which is common for normal contractual relationships, to 

government and supplier data. 

Following an investigation of these issues begun last Congress, I asked GAO to 

look into VA’s oversight and management of these relationships. Unfortunately, 

what GAO found is typical regarding data reliability within VA. For instance, VA 

cannot account for the extent to which it utilized interagency agreements for FY12 

through FY14. For this period, VA had data showing that it obligated at least $1.7 

billion for this period, when in fact, GAO found that this amount was actually between $2.6 and $2.9 billion, amounting to a $600 to $900 million inconsistency. 

Further, half of the interagency agreements G–A-O reviewed did not contain necessary documentation, which is another of the many instances where VA’s poor 

oversight and management of its procurement processes leaves the department open 

to rampant waste, potential fraud, and certain abuse. Similarly VA obligated over 

$260 million in this same FY12 through FY14 period to FFRDCs. One downfall with 

FFRDCs is that they are noncompetitive, as is evidenced by the fact that nearly all 

of VA’s relationships with them are with those operated by one corporation. 

Additional shortfalls GAO found with VA’s data include a failure to centrally 

track some contract actions, limited documentation of pre-award reviews, and in 

some cases, contract files that did not indicate why VA determined a contract price 

was acceptable. This hearing will highlight yet another set of contracting problems 

within VA, where hundreds of millions, if not billions, of dollars are unaccounted 

for. 

In a time where VA has come back to Congress to ask for an additional $3 billion 

because it has run out of money it should have to serve veterans, I consider this 

another grave failure. I look forward to the discussion we will have here today on 

this important issue. 

With that, I now yield to Ranking Member Kuster for any opening remarks she 

may have. 


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