VA SURGICAL 

IMPLANTS

Purchase 

Requirements Were 

Not Always Followed 

at Selected Medical 

Centers and 

Oversight Needs 

Improvement

Report to Congressional Requesters

January 2014

GAO-14-146

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-146, a report to 

congressional requesters

January 2014

VA SURGICAL IMPLANTS

Purchase Requirements Were Not Always Followed at 

Selected Medical Centers and Oversight Needs 

Improvement

Why GAO Did This Study

VHA spending on surgical implants—

such as stents and bone and skin 

grafts—has increased to about $563 

million in fiscal year 2012. Clinicians at 

VAMCs determine veterans’ needs and 

request implant purchases either from 

a contract or from the open market 

(i.e., not from an existing contract). 

VHA requirements—which implement 

relevant federal regulations—include 

providing justifications for open-market 

purchases. 

GAO was asked to evaluate implant 

purchasing by VHA. This report 

examines (1) factors that influence 

clinicians’ decisions to use particular 

implants when multiple, similar items 

are available; (2) selected VAMCs’ 

compliance with pertinent VHA 

requirements for documenting openmarket purchases; and (3) VA’s and 

VHA’s oversight of VAMC compliance 

with implant purchasing requirements. 

GAO visited four VAMCs that serve 

large veteran populations and are 

dispersed geographically. GAO 

interviewed clinicians at the VAMCs, 

reviewed pertinent statutes, 

regulations, and policies and reviewed 

a sample of implant purchases from 

different vendors. These results cannot 

be generalized to all VAMCs but 

provide insights. GAO also interviewed 

VA and VHA officials and reviewed 

agency documents.

What GAO Recommends

GAO recommends that VA identify 

implants and establish a timeline to 

expand the volume that can be 

purchased from VA-negotiated 

contracts and improve compliance with 

and oversight of purchasing 

requirements. VA concurred with these 

recommendations.

What GAO Found

Clinicians at the four Department of Veterans Affairs Medical Centers (VAMC) 

GAO visited said that patient need and their clinical expertise were the main 

factors influencing their decisions of which surgical implants to use. Also, 

clinicians in certain specialties said they typically used one of the implants 

available on VA-negotiated national committed-use contracts, which generally 

establish a fixed price for several models of nine types of surgical implants that 

the Veterans Health Administration (VHA) commits to using nationally. VHA 

recognizes the need for expanding items covered under these contracts to fully 

leverage its purchasing power but, as of October 2013, had not identified 

additional implants to include on such contracts or established timelines for doing 

so. GAO also found that the availability of implants on VA-negotiated federal 

supply schedule (FSS) contracts rarely influenced clinicians’ decisions on which 

implant to use. Clinicians were often not aware of the availability of surgical 

implants on FSS contracts, which are negotiated by one of VA’s contracting 

offices, but for which VHA clinicians have little or no input. Clinicians told GAO 

that in some cases they may avoid implants on FSS contracts due to their 

concerns about the quality of these items.

In regard to compliance with VHA’s requirements for justifying open-market 

purchases of surgical implants, which VHA adopted to promote adherence to 

relevant federal regulations, GAO found the following:

• None of the four VAMCs fully complied with requirements for obtaining 

waivers for open-market purchases of surgical implants because they were 

focusing on other priorities or lacked awareness of the requirements, among 

other factors.

• None of the four VAMCs fully complied with additional requirements for 

documenting open-market purchases that are part of a new process VHA 

implemented in fiscal year 2013 for surgical implant purchases over $3,000. 

VAMC and regional office officials attributed noncompliance mainly to 

insufficient VHA guidance and VA staff’s inexperience in completing these 

requirements.

• Three of the four VAMCs did not comply with a VHA requirement pertaining 

to agreements with vendors that provided surgical implants to them on 

consignment. These agreements, which clinicians likely established to 

ensure timely access to implants, do not comply with a VHA requirement that 

consignment agreements must be authorized by a VHA contracting officer.

The Department of Veterans Affairs (VA) and VHA have begun conducting 

oversight of surgical implant purchases over $3,000 to assess compliance with 

VHA’s new requirements. However, VHA officials told GAO that VA and VHA 

have not ensured that corrective action has been taken to address identified 

noncompliance because of poor communication between VA and VHA and 

insufficient staffing to follow up on identified issues. Furthermore, VHA assesses 

each VAMC’s performance on metrics established for surgical implant 

purchasing, but it does not have a policy governing how any identified 

deficiencies should be addressed nor the corrective actions to be taken by 

VAMCs and VHA’s regional networks.

View GAO-14-146. For more information, 

contact Randall B. Williamson at (202) 512-

7114 or williamsonr@gao.gov.
Page i GAO-14-146 VA Surgical Implant Purchasing

Letter 1 

Background 4

Clinicians Chose Surgical Implants Based Mainly on Patient Need, 

Their Clinical Expertise, and, To a Lesser Extent, Implant 

Availability on Purchasing Contracts 9

Selected VAMCs Did Not Fully Comply with VHA Requirements 

for Documenting Surgical Implant Purchases from the Open 

Market 13

VA and VHA Did Not Ensure that Corrective Actions Were Taken 

when Noncompliance with Surgical Implant Purchasing 

Requirements Was Identified 22

Conclusions 25

Recommendations for Executive Action 26

Agency Comments 27

Appendix I Scope and Methodology 28

Appendix II Veterans Implant Tracking and Alert System 33

Appendix III Comments from the Department of Veterans Affairs 34

Appendix IV GAO Contact and Staff Acknowledgments 37

Tables

Table 1: Overview of the Purchasing Hierarchy for Surgical 

Implants within the Veterans Health Administration (VHA) 8

Table 2: Characteristics of VA medical centers (VAMC) Selected 

for Site Visits 28

Figure

Figure 1: Veterans Health Administration’s (VHA) New Processes 

for Purchasing Surgical Implants 7

Contents
Page ii GAO-14-146 VA Surgical Implant Purchasing

Abbreviations

eCMS Electronic Contract Management System

FAR Federal Acquisition Regulation

FSS Federal Supply Schedule

JOFOC Justification for other than full and open competition

NCO Network contracting office

NPPD National Prosthetics Patient Database

VA Department of Veterans Affairs

VAAR VA Acquisition Regulation

VAMC VA medical center

VHA Veterans Health Administration

VITAS Veterans Implant Tracking and Alert System

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-14-146 VA Surgical Implant Purchasing

441 G St. N.W.

Washington, DC 20548

January 13, 2014

The Honorable Mike Coffman

Chairman

Subcommittee on Oversight and Investigations

Committee on Veterans’ Affairs

House of Representatives

The Honorable Bill Johnson

House of Representatives

The Department of Veterans Affairs (VA) Veterans Health Administration 

(VHA) is one of the largest purchasers of surgical implants, which include 

biological implants, such as skin and bone grafts, and non-biological 

implants, such as cardiac pacemakers and artificial joints. Surgical 

implants fall under VHA’s definition of prosthetics, which includes all items 

that support or replace a body part or function.1 Federal law grants the 

Secretary of VA the authority to procure prosthetics and related 

necessary services in such manner as the Secretary may determine to be 

proper, without regard to any other provision of law.2 VHA has exercised 

this authority to limit competition when purchasing prosthetics—including 

surgical implants— when doing so is necessary to meet veterans’ clinical 

needs. Specifically, surgeons and other clinicians at VA medical centers 

(VAMC) determine veterans’ needs for surgical implants. While VA has 

negotiated competitive contracts for a variety of surgical implants, VAMCs 

or VHA’s regional network contracting offices (NCO) can purchase a 

specific surgical implant requested by a clinician from the open market 

with appropriate clinical justification, rather than purchasing a similar item 

through a competitive contract.3

 

1

VHA’s definition of prosthetics includes items worn by the veteran, such as an artificial 

limb or hearing aid, as well as surgical implants.

VHA’s spending on surgical implants 

2

38 U.S.C. § 8123.

3

VHA negotiates national, regional, and local competitive contracts with vendors for all 

types of items—including surgical implants. Items that are not purchased from these 

contracts are referred to as open-market purchases. There are 21 NCOs throughout 

VHA’s health care system that manage the contracting activities of the VAMCs within each 

of VHA’s 21 Veterans Integrated Service Networks. These networks oversee the day-today functions of VAMCs that are within their network.
 

Page 2 GAO-14-146 VA Surgical Implant Purchasing

increased about 28 percent over the last four years and was about 

$563 million in fiscal year 2012.

At a recent congressional hearing, concerns were raised about the extent 

to which VAMCs and NCOs purchase surgical implants from the open 

market without appropriate justification, rather than purchasing such items 

from competitive contracts—potentially at a lower cost.4

1. Factors that influence clinician decisions to use particular surgical 

implants when multiple, similar items are available;

Concerns were 

also raised about VHA’s oversight of VAMCs’ and NCOs’ purchases of 

surgical implants, which may have allowed insufficiently documented 

purchases of these items to go unnoticed. You asked us to review VHA’s 

purchasing of surgical implants, including requirements for documenting 

purchases from the open market and oversight of compliance with these 

requirements. This report examines

2. Compliance at selected VAMCs with pertinent VHA requirements for 

documenting surgical implant purchases from the open market; and

3. VA and VHA oversight of compliance with surgical implant purchasing 

requirements.

To examine the factors that influence clinician decisions to use particular 

surgical implants when multiple, similar items are available, we visited 

VAMCs in four locations: Indianapolis, Indiana; Los Angeles, California; 

New York, New York; and Seattle, Washington.5 At each of the four 

VAMCs, we interviewed at least one clinician from each of six clinical 

specialties that typically use surgical implants to obtain information on the 

factors they consider when choosing which surgical implant to use when 

multiple, similar types of implants are available.6

 

4

Purchasing Perspective: VA’s Prosthetics Paradox, Before the Subcomm. on Oversight 

and Investigations of the H. Comm. on Veterans’ Affairs, 112th Cong. (2012). 

In total, we interviewed 

5

We selected these four VAMCs because they are all classified by VHA as surgically 

complex facilities, all serve large veteran populations, and are each located in a different 

network. VAMCs that are assigned a complex rating require special facilities, equipment, 

and staff for difficult operations, such as cardiac surgery. Each of the VAMCs we visited 

served more than 50,000 unique patients in fiscal year 2012.

6

The six clinical specialties we selected included cardiology or cardiac surgery; general 

surgery; orthopedic surgery; neurosurgery; podiatry; and vascular surgery. 
 

Page 3 GAO-14-146 VA Surgical Implant Purchasing

28 clinicians. In addition, we interviewed staff, such as the operating room 

nurse manager, involved in managing surgical implants at the VAMCs.

To assess compliance at the four selected VAMCs with pertinent VHA 

requirements for documenting surgical implant purchases from the open 

market, we first identified the applicable requirements. To do so, we 

reviewed VA’s statutory authority to acquire prosthetics—including 

surgical implants, applicable federal regulations—including the Federal 

Acquisition Regulation (FAR) and VA Acquisition Regulation (VAAR) and 

implementing guidance issued by VA and VHA with respect to surgical 

implant purchasing.7 To learn more about VA’s and VHA’s surgical 

implant purchasing processes for surgical implant purchases from the 

open market, we also interviewed procurement and prosthetics officials at 

VA and VHA. To determine compliance with pertinent requirements, 

applicable to surgical implant purchases from the open market at each of 

the four VAMCs we visited, we reviewed documentation related to 

selected purchases that occurred in the first 6 months of fiscal year 2013. 

We reviewed the VHA data from which we selected 257 purchases. We 

selected these purchases to obtain a diverse group of purchases from 

different vendors. The purchases we reviewed represented from about 

6 percent to about 83 percent of the applicable purchases at each VAMC 

in the first 6 months of fiscal year 2013.8

 

7

The FAR contains government-wide regulations and establishes uniform policies and 

procedures used by all executive branch federal agencies for their acquisitions. VA 

supplements the FAR with the VAAR to establish uniform policies and procedures for all 

VA acquisitions. The FAR and agency supplements are codified in title 48 of the Code of 

Federal Regulations. With respect to VA’s and VHA’s implementing policies for surgical 

implant purchases, we reviewed, for example, VA Handbook 7408.1, Requesting Waivers 

From the Requirement to Use VA Federal Supply Schedules (June 9, 2005); and VHA 

Directive 2009-062, Management of Non-Biological Implantable Devices (Nov. 23, 2009).

For each of the four VAMCs we 

visited, we also interviewed VAMC and network officials regarding 

compliance with these requirements. Our findings on compliance are not 

generalizable beyond the purchases we reviewed. To ensure that the 

data we used to select purchases for review were sufficiently reliable for 

our purposes, we conducted a detailed data reliability assessment of the 

data that we used, which included checks for missing values and 

interviews with a VHA official knowledgeable about the data. We 

restricted these assessments, however, to the specific variables that were 

pertinent to our analyses. Our review revealed some inconsistencies and 

8

The range in percentages is the result of large differences in the number of open market 

purchases at each VAMC.
 

Page 4 GAO-14-146 VA Surgical Implant Purchasing

errors in the data that were attributable to data entry errors and 

omissions. Overall, however, we found that all of the data were 

sufficiently reliable for selecting our purchases for review.

To examine VA and VHA’s oversight of compliance with surgical implant 

purchasing requirements, we obtained and analyzed VA and VHA 

documentation on existing or planned monitoring activities, including audit 

plans and reports documenting deficiencies in VAMCs’ purchasing of 

surgical implants; interviewed VA and VHA procurement and prosthetics 

officials and officials from the networks that oversee the four VAMCs we 

visited;9 and assessed VA and VHA’s monitoring activities in the context 

of federal standards for internal control.10

We conducted this performance audit from April 2013 to January 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. See appendix I for more 

information on our scope and methodology, including additional 

information on the four VAMCs we visited, the purchases we reviewed, 

and the steps we took to assess data reliability.

VHA provides health care services to veterans at VHA’s 152 VAMCs and 

associated outpatient clinics. Such care can include providing surgical 

implants, where required—including biological implants, such as skin 

 

9

Each network has a prosthetics representative who is responsible for the day-to-day 

management of prosthetics purchasing at each VAMC.

10These standards provide an overall framework for establishing and maintaining internal 

control and for identifying and addressing major performance and management 

challenges and areas at greatest risk of fraud, waste, abuse, and mismanagement. For 

example, under the standards for internal control, monitoring should assess the quality of 

performance over time and ensure that the findings of audits and other reviews are 

promptly resolved. See GAO, Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1, 1999) and its supplemental guide, 

Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.: 

Aug. 1, 2001).

Background
 

Page 5 GAO-14-146 VA Surgical Implant Purchasing

grafts, and non-biological implants, such as cardiac pacemakers.11

The purchasing process used by VHA varies depending on the purchase 

price of the implant. For purchases under the FAR’s micro-purchase 

threshold of $3,000, prosthetics purchasing staff at VAMCs are 

responsible for ordering the implant that the clinician has requested for an 

upcoming surgery or replacing an implant in the VAMC’s inventory after 

one has been used for a surgery, and subsequently documenting the 

purchase in VHA’s prosthetics purchasing system.

Surgeons and other clinicians at VAMCs determine veterans’ needs for 

surgical implants and provide VAMC prosthetics purchasing staff with 

documentation showing which item will be implanted in the veteran or has 

already been implanted in the veteran (if the surgery has been 

completed).

12 This includes 

documenting information on the item purchased, the vendor, and the 

serial and lot numbers of the item implanted in the veteran. VHA has 

developed a new purchasing process for purchases above the FAR’s 

micro-purchase threshold of $3,000 but below the simplified acquisition 

threshold of $150,000.13 This process requires prosthetics purchasing 

staff at VAMCs to work with contracting officers from VHA’s NCOs, with 

the intention of achieving greater compliance with the FAR and the 

VAAR.14

 

11Other common types of biological implants include tendons, bone chips and corneal 

implants, whereas other common types of non-biological implants include heart valves 

and stents.

VHA began implementing this process in fiscal year 2012, and 

VAMCs were required to implement it by the end of fiscal year 2013. As a 

first step under this new purchasing process, VAMC prosthetics 

purchasing staff begin assembling a contracting package in VHA’s 

12The prosthetics purchasing system is used to record the purchase of all prosthetics, 

including surgical implants.

13See 48 C.F.R. § 2.101 for threshold definitions and amounts. Purchases below the 

FAR’s micro-purchase threshold of $3,000 generally require less stringent documentation 

than purchases above the micro-purchase threshold. The FAR also sets forth the 

procedures applicable to purchases below the simplified acquisition threshold at 

48 C.F.R. Part 13. These procedures are designed to promote efficiency and economy 

in contracting and to avoid unnecessary burdens for agencies and contractors. See 

41 U.S.C. § 1901(a), (c); 48 C.F.R. § 13.002.

14Each contracting officer works within a NCO and is overseen by managers within that 

office who report to VHA’s Procurement and Logistics Office. VHA had previously 

implemented this new purchasing process for other items, such as medical supplies.
 

Page 6 GAO-14-146 VA Surgical Implant Purchasing

electronic Contract Management System (eCMS),15 and are required to 

include specifications of the surgical implant requested by the clinician. 

Then, they submit this package to contracting officers at the 

corresponding NCOs who, in turn, are responsible for completing the 

contracting package for each purchase in eCMS. For each contracting 

package, NCO contracting officers have to enter over 100 data fields in 

eCMS. After completing the contracting package, NCO contracting 

officers are responsible for ordering the implant and documenting the 

purchase in the prosthetics purchasing system. VAMCs that had not yet 

implemented the new process were required to complete an abbreviated 

contracting package beginning in January 2013, outlined in a 

memorandum issued by VA’s Office of Acquisition and Logistics, until 

they fully implemented the new purchasing process.16

 

15eCMS is a web-based system for recording contracting actions throughout VHA.

(See fig. 1 for an 

overview of the new surgical implant purchasing process.)

16Under the abbreviated process, the prosthetics purchasing staff completed an 

abbreviated contracting package, which they submitted to their respective NCO, and 

documented the surgical implant purchase in the VHA prosthetics purchasing system.
 

Page 7 GAO-14-146 VA Surgical Implant Purchasing

Figure 1: Veterans Health Administration’s (VHA) New Processes for Purchasing Surgical Implants

a

As of January 9, 2013, VAMCs that had not yet implemented the new contracting process for 

surgical implant purchases over $3,000 were required to follow an abbreviated version of this process 

as outlined in a memorandum issued by VA’s Office of Acquisition and Logistics. Under the 

abbreviated process, VAMC prosthetics purchasing staff completed an abbreviated contracting 

package, which they submitted to their respective NCO, and documented the surgical implant 

purchase in the VHA prosthetics purchasing system. VAMCs were required to fully implement the 

new contracting process by September 30, 2013.
 

Page 8 GAO-14-146 VA Surgical Implant Purchasing

When purchasing surgical implants, VAMCs are generally required to 

follow a purchasing hierarchy of preferred supply sources that favor 

competitive contracts, as specified in the VAAR.17

Table 1: Overview of the Purchasing Hierarchy for Surgical Implants within the Veterans Health Administration (VHA)

In order of preference, 

these competitive contracts are VA national committed-use contracts, 

Federal Supply Schedule (FSS) contracts, and regional or local contracts. 

The open market is the least preferred source, regardless of the cost of 

the implant. (See table 1 for a description of these types of contracts.)

Order of priority Type of contract Description

1 National committed-use contract Negotiated by the National Acquisition Center—one of VA’s contracting 

offices— these contracts typically establish a fixed price for several 

models of a certain type of surgical implant.a

2 

VHA commits to use the 

items included on these contracts throughout its healthcare system. As 

of September 2013, these contracts covered the following nine types of 

non-biological surgical implants: cardiac pacemakers and leads, 

implantable cardioverter-defibrillators, cardiac resynchronization 

treatment devices, remote monitoring devices, coronary stents, artificial 

hips, artificial knees, cochlear implants, and intraocular lenses. As of 

October 2013, these contracts only included non-biological implants.

Federal Supply Schedule (FSS) 

contract

Negotiated by the National Acquisition Center, these contracts are 

indefinite delivery-indefinite quantity contracts, which are awarded to 

multiple vendors for various types of surgical implants, both biological 

and non-biological.

FSS contracts may include blanket purchase agreements, which allow 

VHA to purchase FSS items at prices that are further discounted from 

FSS prices, typically by agreeing to quantity requirements. Blanket 

purchasing agreements can be negotiated at the national, network, or 

VA medical center (VAMC) level.

3 Regional or local contract Negotiated by VHA contracting officers, these contracts can cover a 

VAMC or network, and are indefinite delivery-indefinite quantity 

contracts. They do not cover items available on national committed-use 

contracts or FSS contracts.

4 Open market Open market purchases are those that are not made through an existing 

contract.

Source: GAO analysis of VAAR and VA policy document provisions.

a

VA officials noted that these contracts are generally multiple award, indefinite delivery-indefinite 

quantity contracts subject to ordering procedures under FAR 16.505.

 

1748 C.F.R. § 808.002(a).
 

Page 9 GAO-14-146 VA Surgical Implant Purchasing

Because open market purchases are the least preferred purchasing 

source in VA’s purchasing hierarchy, VAMCs must request a waiver to 

purchase on the open market instead of using a higher-priority source of 

supply listed in the VAAR. As further stipulated by VA policy guidance, 

the waiver request must show that the clinical needs of the veteran 

cannot be met using a surgical implant available through a higher-priority 

contract—that is, a national committed-use contract, FSS contract, or 

regional or local contract. This requirement applies regardless of the cost 

of the implant.

Open market purchases of surgical implants above $3,000 but below the 

FAR’s simplified acquisition threshold of $150,000 are subject to 

additional documentation requirements that are part of VHA’s new 

contracting process, which VHA implemented to foster greater 

consistency in the application of relevant FAR and VAAR provisions. 

Under this process, the contracting package for such purchases must 

include, among other things, a written determination of price 

reasonableness and, if the purchase was made noncompetitively, a 

justification for other than full and open competition (JOFOC) citing the 

rationale for the sole-source award.

Clinicians at four VAMCs cited patient need and their clinical expertise in 

using available surgical implants as the most important factors influencing 

their decisions of which surgical implants to use. In addition, certain 

clinicians stated that the availability of committed use contracts also 

influenced their decisions, whereas the availability of FSS contracts 

generally did not.

Clinicians Chose 

Surgical Implants 

Based Mainly on 

Patient Need, Their 

Clinical Expertise, 

and, To a Lesser 

Extent, Implant 

Availability on 

Purchasing Contracts
 

Page 10 GAO-14-146 VA Surgical Implant Purchasing

Many clinicians we interviewed at the four selected VAMCs stated that 

the specific needs of the patient were one of the two main factors that 

influenced their decision of which surgical implant to purchase and use. 

Clinicians stated that even though different types of surgical implants may 

appear to be identical to the lay person, there may be differences that can 

affect patient outcome. For example, one clinician stated that a flexible 

stent available through only one vendor was necessary to meet the needs 

of a patient with arteries that were difficult to navigate.

Many of the clinicians we interviewed stated that the other main factor 

influencing their decision of which surgical implant to use was their clinical 

expertise, which they acquired through their training and clinical 

experience, review of relevant literature, and interaction with vendors who 

supply surgical implants:

• Training and experience: Many clinicians we interviewed stated that 

their experiences in using certain types of surgical implants during 

their medical training and/or as a practitioner significantly impacted 

their decision of which item to purchase and use. For example, one 

clinician stated that his knowledge of different types of surgical

implants, including the different features of various implants, is the 

result of 30 years of training and experience.

• Review of relevant literature: Several clinicians stated that they 

regularly reviewed relevant literature to help identify the surgical 

implants with the greatest clinical efficacy. One clinician told us that 

he recently switched to a different type of skin graft because a review 

of the literature suggested that this item was more effective than the 

one that he had been using.

• Interaction with vendors: Several clinicians told us that they work 

closely with vendor representatives who supply surgical implants (for 

example, when implanting a pacemaker, a vendor representative may 

be involved in testing and programming the device). Further, some

clinicians with whom we spoke said that their past experience working 

with a particular vendor, including whether they believe that the 

vendor representative is knowledgeable and reliable, helps drive their 

decision of which implant to use. For example, a clinician stated that 

the reliability of vendors was important in deciding which implant to 

use, since some implants are not stocked at a VAMC and it is 

important that implants are delivered by vendors in time for scheduled 

surgical procedures.

Clinicians Cited Their 

Clinical Expertise and 

Patient Need as the Most 

Important Factors 

Influencing Their Decision 

of Which Surgical Implant 

to Use
 

Page 11 GAO-14-146 VA Surgical Implant Purchasing

Clinicians who performed surgical procedures for which implants were 

available on a national committed-use contract stated that they typically 

used one of the implants available on this type of contract, unless the use 

of these items was not appropriate, for example, for certain complex 

clinical indications. As of September 2013, nine types of surgical 

implants—cardiac pacemakers and leads, implantable cardioverterdefibrillators, cardiac resynchronization treatment devices, remote 

monitoring devices, coronary stents, artificial hips, artificial knees, 

cochlear implants, and intraocular lenses—were available through 

national committed-use contracts. In developing national committed-use 

contracts, VHA solicits input from a group of VHA clinicians to determine 

which items to place on national committed-use contracts and to review 

them for clinical efficacy.18

VHA has recognized the need to develop a greater number of these 

contracts for a variety of surgical implants, to better leverage its 

purchasing power and thereby pay lower prices for surgical implants. In 

2011, VHA established a program management office for prosthetics to 

identify additional surgical implants that could be made available through 

these kinds of contracts and to facilitate the process of establishing and 

implementing them.

Several different models of each type of 

implant are available on national committed-use contracts—for example, 

the contracts for pacemakers include models from three different 

vendors—thereby providing clinicians with a choice of which implant to 

use.

19

 

18In developing national committed-use contracts, VHA establishes teams consisting of 

clinicians and other subject-matter experts who are familiar with the types of surgical 

implants that VHA is considering including on these contracts.

As of October 2013, an official in VHA’s program 

executive office told us the office has been focusing on renewing and resoliciting existing contracts that are expiring. This official also told us that 

it had reviewed data on surgical implant purchases and had begun to 

identify items that are frequently used and high-cost. However, the official 

told us that it was unable to focus on developing additional national 

committed-use contracts because of staffing constraints, and did not have 

19In 2011, VHA established a program executive office, including six program 

management offices. Each of the six program management offices (surgery, medical, 

clinical support, ancillary, advanced systems, and prosthetics) is expected to collaborate 

with teams of clinicians and other stakeholders, who can provide insight on identifying 

certain medical devices for standardization. The program management offices also 

coordinate with VA’s contracting offices, which are responsible for establishing national 

committed-use contracts for standardized items.

Implants’ Availability on 

Certain Purchase 

Contracts Influenced 

Clinicians’ Decisions
 

Page 12 GAO-14-146 VA Surgical Implant Purchasing

a plan or timeline for establishing new contracts. Without the 

establishment of national committed-use contracts for a greater number 

of surgical implants, VHA is not fully leveraging its purchasing power as 

one of the nation’s largest health care systems.

While availability of implants via national committed-use contracts 

positively influenced their use by clinicians we interviewed, the availability 

of implants via FSS contracts rarely did so for a number of reasons. 

Clinicians at the four VAMCs we visited were often not aware of what 

surgical implants were available on an FSS contract, even though these 

contracts are preferred to open market purchases under the VAAR. For 

example, some of these clinicians mistakenly believed that a biological 

implant they were using was on an FSS contract, when in fact it was not. 

Clinicians at the four VAMCs we visited also lacked awareness of how to 

obtain information on which implants were available on an FSS contract. 

In addition, network prosthetics purchasing officials told us that it is 

difficult for both clinicians and prosthetics purchasing agents to use VHA’s 

national database of FSS contracts to determine what specific items are 

available on an FSS contract. For example, the officials stated that very 

specific terms must be entered in the database’s search field in order to 

obtain a useful list of items available on FSS contracts. Some clinicians 

stated that it would be helpful to have a user-friendly list of surgical 

implants available on FSS contracts, including the implant’s attributes—

such as its shelf life and approved clinical indication—for each surgical 

specialty. Clinicians at the four VAMCs we visited noted that such a list 

would allow them to consider FSS contract availability in making their 

decisions on which implant to use. We found that one VAMC we visited 

had begun developing a list of skin grafts available on FSS contracts, 

which included their attributes—such as whether the grafts had to be 

stored in a freezer—to help raise awareness of items available on FSS 

contract.

Some clinicians at the four VAMCs we visited also stated that if there is 

not sufficient data to support the clinical efficacy of an implant on an FSS 

contract, they would not feel comfortable using it. For example, at one 

VAMC, a clinician noted that a specific vendor who had an implant on an 

FSS contract questioned why the implant was not being purchased. The 

clinician asked for clinical efficacy data, which—according to the 

clinician—was never provided, and therefore the clinician decided not to 

use the item. Senior VHA prosthetics and contracting officials stated that 

clinicians are not involved in determining which surgical implants should 

be available on FSS contracts, and therefore the items available on FSS 

contracts may not always be those that clinicians prefer to use based on 
 

Page 13 GAO-14-146 VA Surgical Implant Purchasing

their expertise and experience. Additionally, these officials expressed 

concern that an evaluation of the clinical efficacy of an item is not 

conducted in awarding FSS contracts. These officials further stated that 

VHA prefers to develop national committed-use contracts, for which a 

clinical efficacy evaluation is conducted. The director of a VHA clinical 

program that uses surgical implants further emphasized that clinician 

decisions on which implants to use should be based on proven clinical 

efficacy rather than inclusion on an FSS contract.

We found that among the four VAMCs we visited: (1) none fully complied 

with requirements for obtaining waivers for open-market purchases of 

surgical implants; (2) none fully complied with additional requirements for 

documenting open-market purchases, which are part of VHA’s new 

process for surgical implant purchases over $3,000; and 

(3) three of the four did not comply with a requirement related to 

consignment agreements with surgical implant vendors. 

None of the four VAMCs we visited fully complied with VHA requirements 

for obtaining waivers for open-market purchases of surgical implants. We 

found that one VAMC partially complied with each requirement, while the 

others did not comply. Current VHA requirements applicable to the four 

VAMCs stipulate that

• all open-market purchases of non-biological implants require a waiver 

approved by the VAMC Chief of Staff—regardless of the purchase 

price—when a comparable item would have been available through a 

national committed-use contract, and

• all open-market purchases of biological implants require a waiver 

approved by VHA’s Procurement and Logistics Office—regardless of 

the purchase price—when a decision is made to purchase an item 

from the open market rather than from an FSS contract.20

 

20These requirements are outlined in VHA policy documents.

Selected VAMCs Did 

Not Fully Comply with 

VHA Requirements 

for Documenting

Surgical Implant 

Purchases from the 

Open Market

Selected VAMCs Did Not 

Fully Comply with VHA 

Requirements for 

Obtaining Waivers for 

Open-Market Purchases 

of Surgical Implants
 

Page 14 GAO-14-146 VA Surgical Implant Purchasing

On each of these waivers, VAMCs are required to document why the 

clinician chose not to use a surgical implant that is available on an 

existing, higher-priority contract—for example, because the clinician did 

not believe that the implant met a patient’s need or because the clinician 

had concerns about the quality of the items available on contract.

Specifically, compliance with these waiver requirements was as follows at 

the four VAMCs we visited:

• We found that only one of the four VAMCs we visited partially 

complied with the waiver requirement for open-market purchases of 

non-biological implants, when a comparable item was available 

through a national committed-use contract. At this VAMC, we found 

that waivers were obtained for 27 of the 30 purchases we reviewed; 

however, 20 of the 27 waivers were incomplete, as they lacked the 

approving signature from the VAMC Chief of Staff. A VAMC official 

told us that the Chief of Staff had granted certain clinicians the 

authority to approve their own waivers for open-market purchases; 

however, VHA prosthetics officials told us that the Chief of Staff may 

not delegate this authority and the VAMC was unable to provide 

documentation to support this claim. The other three VAMCs did not 

comply with the requirement, meaning that they did not obtain waivers 

for any of the purchases we reviewed.21

 

21At two of the VAMCs we visited, VHA data indicated that waivers were not being 

completed for open-market purchases of non-biological implants when a comparable item 

would have been available through a national committed-use contract. At the other two 

VAMCs, we selected 20 and 30 purchases for which VHA data indicated that such waivers 

were on file and reviewed whether those waivers were, in fact, on file and whether they 

were complete. At one of these VAMCs, we found that waivers were not on file, even 

though VHA data indicated that they were. VAMC officials told us that VAMC prosthetics 

purchasing staff mistakenly indicated that waivers were on file when making the 

purchases.

Two of these three VAMCs 

had a relatively high percentage of open-market purchases of nonbiological implants in the first two quarters of fiscal year 2013 based 

on VHA data (33 percent and 35 percent, respectively) and one had a 

low percentage of such purchases (2 percent). Officials at two of the 

VAMCs told us that these waivers were not routinely obtained 

because they were focusing on other priorities instead, such as 

implementing VHA’s new process for surgical implant purchases over 

$3,000. At the third VAMC, a prosthetics official told us that clinicians 

did not always fill out a waiver when asked to do so. Furthermore, 

because certain clinicians practice at the VAMC on a very limited 
 

Page 15 GAO-14-146 VA Surgical Implant Purchasing

basis, the official said it is difficult to ensure that they are aware of the 

waiver requirement and comply with it.

• We found that only one of the four VAMCs we visited partially 

complied with the waiver requirement for biological implants when a 

decision is made to purchase an item from the open market rather 

than from an FSS contract, whereas the other three VAMCs did not 

comply.22

Without consistent and appropriate completion of waivers for open market 

purchases of surgical implants, VHA lacks information regarding why 

surgical implants were not being purchased from higher-priority sources 

such as a national committed use contract or an FSS contract. This 

information would help VHA determine whether clinicians raised concerns 

about the quality or efficacy of the items available through these existing 

contracts, which could help VHA improve future implant purchases, and 

could provide a basis for holding clinicians accountable for complying with 

VHA requirements and procurement best practices.

Officials from the three VAMCs that did not comply with the 

requirement told us that they did not obtain these waivers because 

they did not understand under what circumstances a waiver is 

required or were focusing on other priorities instead—such as 

implementing VHA’s new process for surgical implant purchases over 

$3,000. The VAMC that partially complied with the waiver requirement 

for the purchases we reviewed had waivers on file, but the waivers did 

not include the required justification as to why a waiver was needed 

and did not have the required approval from VHA’s Procurement and 

Logistics Office. Prosthetics purchasing officials at this VAMC told us 

that they had only recently begun to establish compliance with this 

waiver requirement.

 

22The VAMC that partially complied with this requirement was different than the one that 

partially complied with the waiver requirement for open-market purchases of nonbiological implants, when a comparable item was available through a national committeduse contract. At each VAMC, we selected 20 to 30 purchases of biological implants which, 

based on VHA data, appeared to have been purchased from the open market for review. 

For the open market purchases, we assessed whether a waiver was obtained for those 

purchases, and if so, whether the waiver was complete.
 

Page 16 GAO-14-146 VA Surgical Implant Purchasing

None of the four VAMCs we visited fully complied with additional 

requirements for documenting open-market purchases of surgical 

implants below the FAR’s simplified acquisition threshold but over $3,000, 

which VHA established as part of its new purchasing process. However, 

all four were partially complying with the requirements. Beginning in fiscal 

year 2013, if a clinician requests a surgical implant over $3,000 from the 

open market, the following are required:23

• a statement affirming that the vendor’s quoted price is fair and 

reasonable and the basis of this determination;24

• a justification for other than full and open competition (JOFOC) that 

cites the legal authority for purchasing a surgical implant where the 

VAMC solicited only one source in making the open-market 

purchase.

and

25

 

23The beginning dates for completing these requirements varied by VAMC, depending on 

when they implemented VHA’s new process for surgical implant purchases over $3,000. 

We assessed compliance against the requirements in place at each of the four VAMCs we 

reviewed at the time the purchases were made.

Under VHA’s new process, the JOFOC must cite one of 

two justifications applicable to sole-source purchases of surgical 

implants on the open market: (1) unusual and compelling urgency or 

24The FAR provides several different methods for determining whether the vendor’s price 

is fair and reasonable when using simplified acquisition procedures. Where possible, the 

contracting officer is to base price reasonableness on competitive quotations or offers. 

However, if only one response is received, the FAR requires a statement of price 

reasonableness in the contracting file, which may be based on such things as conducting 

market research, comparing the quoted price with the price of similar items in a related 

industry, or comparing the quoted price with prices found reasonable on a previous 

purchase, among other methods. See 48 C.F.R. § 13.106-3(a).

25Although simplified acquisitions are exempt from the general requirement for full and 

open competition, contracting officers must promote competition to the maximum extent 

practicable when using simplified acquisition procedures and are to include a statement in 

the contracting file explaining the absence of competition when only one source is 

solicited. See 48 C.F.R. §§ 13.104, 13.106-1(b)(1), 13.106-3(b)(3)(i). 

Selected VAMCs Did Not 

Fully Comply with 

Additional VHA 

Requirements for 

Documenting OpenMarket Purchases of 

Surgical Implants over 

$3,000
 

Page 17 GAO-14-146 VA Surgical Implant Purchasing

(2) VA’s special authority under 38 U.S.C. § 8123 to acquire 

prosthetics without regard to other provision of law.26

Depending on the VAMC, these documentation requirements were either 

completed by VAMC prosthetics purchasing staff or a contracting officer 

at the corresponding NCO.

Compliance with these requirements was as follows at the four VAMCs 

we visited:27

• Fair and reasonable price determination: The fair and reasonable 

price determination was not on file for between 7 and 36 percent of 

the applicable purchases we reviewed at three of the four VAMCs. It 

was on file for all applicable purchases at the fourth VAMC. However, 

we found that the documentation on file did not provide reasonable 

assurance that the price was fair and reasonable for the majority of 

purchases we reviewed. We found multiple instances where the 

documentation indicated that the determination was based on “prior 

experience purchasing similar items” but did not cite any prior pricing 

information. Not citing any prior pricing information leaves open 

questions about the thoroughness of the analysis conducted to 

determine price reasonableness. We also identified cases where the 

contracting officer or prosthetics purchasing agent documented the 

price as “fair and reasonable” when it fell within a broad range of 

prices. For example, a contracting officer determined that about 

$6,000 for a bone graft purchased from the open market was fair and 

reasonable because the sales prices for “similar” items was typically 

between $3,000 and $20,000.28

 

26VHA’s criteria for the unusual and compelling urgency exception is as follows: the 

surgical implant is not available for purchase on an existing contract and will be purchased 

on an open-market basis and (1) the delivery time does not meet the patient’s medical 

needs and there is documentation to support the compelling special need or (2) a medical 

emergency exists and there is medical justification to support the need. VHA’s criteria for 

justifying a sole-source purchase based on VA’s special statutory authority under 

38 U.S.C. § 8123 is as follows: the surgical implant is not available for purchase on an 

existing contract and will be purchased on an open-market basis because the patient’s 

medical need cannot be met through the use of a required source of supply or service and 

there is medical documentation to support the need.

VAMC and NCO officials we 

interviewed stated it is difficult to determine price reasonableness for 

27We reviewed between 15 and 28 purchases over $3,000 at each VAMC we visited.

28The FAR allows the fair and reasonable price determination to be based on a 

comparison with similar items in a related industry.
 

Page 18 GAO-14-146 VA Surgical Implant Purchasing

surgical implants, in part, because they need to be knowledgeable of 

the exact characteristics of the item in question in order to effectively 

evaluate price reasonableness. They also said they believed that as 

contracting officers gain more experience in purchasing surgical 

implants, they will learn to more effectively complete this 

documentation. Furthermore, an NCO official stated that specific 

guidance from VHA on how to effectively complete the fair and 

reasonable price determination for surgical implants would be helpful. 

Ineffective market research and determination of price 

reasonableness may result in VHA overpaying for surgical implants.

• JOFOC: During our review of selected open-market surgical implant 

purchases over $3,000, we found two issues with respect to those 

purchases made on a sole-source basis for which a JOFOC was 

required under VHA’s new purchasing process. First, the JOFOC was 

not on file for between 5 and 29 percent of the applicable purchases 

we reviewed at the four VAMCs we visited. Second, at three of the 

VAMCs we visited, we found that the officials responsible for 

completing the JOFOC selected the “unusual and compelling 

urgency” justification for each of the purchases we reviewed, even 

though some officials told us that they did not have a full 

understanding of which justifications applied. Specifically, we found 

the following:

• Officials from two of these VAMCs told us that they were unclear 

about which justification to cite on the JOFOC for each purchase 

because they believed VHA guidance on this matter was 

insufficient. For example, one official responsible for completing 

the JOFOC stated that he did not understand the difference 

between the justifications and therefore picked the one that made 

the most sense to him.

• Officials at another VAMC stated that they chose the “unusual and 

compelling urgency” justification because the contracting package 

for surgical implants is typically completed after the item has 

already been implanted and therefore this justification made the 

most sense to them. Furthermore, officials at this VAMC stated 

that a VHA draft directive on surgical implant purchasing 

discourages the use of VA’s acquisition authority under 38 U.S.C. 

§ 8123 to justify sole-source awards of surgical implants on the 

open market. Because they were discouraged from using this 

justification on the JOFOC, they tended to rely on the “unusual 

and compelling urgency” justification instead.
 

Page 19 GAO-14-146 VA Surgical Implant Purchasing

Moreover, while VHA requires each JOFOC to include sufficient facts and 

rationale to support why a specific justification was cited, only one of the 

four VAMCs fully provided this information for any of the purchases we 

reviewed. At two VAMCs, no rationale was provided for the justification 

selected. Furthermore, the JOFOCs at these two VAMCs were frequently 

missing required information, such as the contracting officer’s signature, 

or were not completed until several months after the purchase. At the 

fourth VAMC, each JOFOC for the purchases we reviewed typically 

included a generic paragraph stating that the purchase was justified 

based on the determination of the clinician who requested the implant, 

regardless of which justification was cited. VAMC and NCO officials told 

us that clinicians’ surgical implant purchase requests often do not contain 

sufficient information to support why the clinician was requesting the 

particular item. Because the JOFOCs we reviewed were often 

incomplete, VHA lacks assurance that support existed for the sole-source 

awards pursuant to VHA’s policies at these four VAMCs.

As we discuss later, VA and VHA both identified more widespread areas 

of noncompliance (in the areas we describe above)—beyond the 4 

VAMCs we visited—through oversight efforts they conducted at 

numerous VAMCs and NCOs nationwide. For example, VA’s oversight 

identified extensive noncompliance, including inadequate fair and 

reasonable price determinations and missing or improperly completed 

JOFOCs. 

VHA officials stated that they were familiar with the challenges that 

VAMCs and NCOs were experiencing with complying with the 

requirements of VHA’s new process for surgical implant purchases over 

$3,000 and acknowledged that some of these challenges stem from a 

lack of sufficient guidance for implementing this new process. To address 

these challenges, VHA officials stated that VHA has developed additional 

guidance to facilitate the purchase of these items. This guidance includes 

(1) revised JOFOC templates to help ensure that the correct purchasing 

justification is cited and that an appropriate rationale is provided for using 

each justification and (2) additional guidance on completing the fair and 

reasonable price determination, which, as of November 2013, had not yet 

been issued. Moreover, VHA contracting officials stated that VHA plans to 

provide training on the documentation of purchases over $3,000; 

however, as of November 2013, this training had not yet been approved. 

In addition, VHA is developing a directive and associated standard 

operating procedure that outline the processes VAMCs and NCOs are 

expected to follow when completing contracting packages for surgical 

implant purchases over $3,000, including a JOFOC in the event of a sole-
 

Page 20 GAO-14-146 VA Surgical Implant Purchasing

source purchase. As of November 2013, VHA was still in the process of 

providing its draft directive and standard operating procedure to 

stakeholders for review, and there are no established timelines for 

finalizing this directive and standard operating procedure, according to 

VHA officials. VHA officials stated that there had been disagreement 

between VHA prosthetics and contracting officials concerning the details 

of the directive and standard operating procedure–for example, which 

specific requirements would be the responsibility of VAMC prosthetics 

purchasing staff and which would be the responsibility of NCO contracting 

officers. According to VHA officials, these disagreements delayed the 

completion of these documents and disseminating them to VAMCs and 

NCOs.

VHA officials also told us that they are considering ways to streamline the 

documentation requirements for purchases over $3,000 in response to 

concerns from VAMCs and NCOs about the resources required to 

complete a contracting package for each purchase and potential delays in 

making purchases for surgical implants, which could result in the 

postponement of needed medical procedures. For example, VHA officials 

stated that they are considering providing VAMC prosthetics purchasing 

staff with ordering officer delegations, which would allow them to 

purchase surgical implants from national committed-use contracts, 

without having to work with a contracting officer to complete a contracting 

package for such a purchase. They told us that this would free up 

contracting officers’ time to work on documenting open market purchases 

and help ensure that these purchases are appropriately documented. 

However, VHA officials told us that they were still in the process of 

evaluating the feasibility of delegating ordering authority to prosthetics 

purchasing staff, including addressing technical challenges with the 

prosthetics purchasing system, which they said currently prevent VHA 

from effectively implementing this change. Again, no timelines have been 

established to complete streamlining efforts, according to VHA officials.
 

Page 21 GAO-14-146 VA Surgical Implant Purchasing

Officials at three of the four VAMCs we visited told us that the VAMCs 

had purchasing agreements with open-market vendors to provide surgical 

implants to the VAMCs on consignment, but that these agreements were 

not always in compliance with a VHA requirement that consignment 

agreements be authorized by a VHA contracting officer.29 Under a 

consignment agreement, the vendor maintains vendor-owned items at the 

VAMC, and the VAMC purchases only the items actually used. VAMC 

and network officials told us that clinicians likely made these unauthorized 

agreements with vendors to ensure that they had timely access to the 

surgical implants that they preferred to use. However, they could not tell 

us when these agreements had been established, who had authorized 

them, and what the terms of the agreements were. These officials told us 

that the unauthorized agreements with vendors have resulted in 

unauthorized commitments, vendors not being paid in a timely manner, 

and surgical implants not being tracked in the VAMCs’ inventories.30

To address these unauthorized consignment agreements, officials at 

each of these VAMCs or the corresponding networks stated that they 

were in the process of establishing authorized consignment agreements 

which include an agreed-upon price and quantity for each surgical 

implant. Having authorized consignment agreements in place may be 

useful in instances where the requirement for a surgical implant is 

immediate and it is not possible to predetermine which of several types or 

models are required. Establishing such agreements involves determining 

the types of surgical implants that clinicians need to have available on a 

consignment basis and obtaining a contracting officer’s authorization for 

the VAMC to enter a consignment agreement with the vendors. At the 

time of our review, VHA was developing a standard operating procedure 

Furthermore, because these unauthorized agreements covered surgical 

implants from the open market, and the purchase prices were not 

negotiated, the VAMCs may have overpaid for these items.

 

29See VHA Directive 2009-062, Management of Non-Biological Implantable Devices 

(Nov. 23, 2009).Officials responsible for surgical implant purchasing at the fourth VAMC 

told us that they did not have any unauthorized consignment agreements in place.

30Unauthorized commitments refer to situations where a contract is entered into by 

someone other than an authorized contracting officer. We previously reported that tracking 

items used for patient care in VAMC inventories is important to help respond to a 

manufacturer or Food and Drug Administration recall of these items. See GAO, VA Health 

Care: Weaknesses in Policies and Oversight Governing Medical Supplies and Equipment 

Pose Risks to Veterans’ Safety, GAO-11-391 (Washington, D.C.: May 3, 2011).

Three of Four VAMCs Did 

Not Comply with a VHA 

Requirement Pertaining to 

Consignment Agreements 

with Surgical Implant 

Vendors
 

Page 22 GAO-14-146 VA Surgical Implant Purchasing

to assist VAMCs and NCOs in developing authorized consignment 

agreements, however, as of November 2013 they were unsure as to 

when it would be finalized and rolled out to the VAMCs.

As a result of their oversight efforts, VA and VHA found noncompliance 

with surgical implant purchasing requirements, but did not ensure that 

NCOs or VAMCs took corrective action. Furthermore, VHA assesses how 

each VAMC is performing on key aspects of the surgical implant 

purchasing process, but it did not ensure that VAMCs took corrective 

action to address deficiencies identified or require networks to do so.

Oversight of VAMCs’ and NCOs’ compliance with VHA’s new process for 

surgical implant purchasing over $3,000 includes efforts by both VA’s 

Office of Acquisition and Logistics and VHA’s Office of Procurement and 

Logistics.31

Recent VA and VHA oversight activities that identified significant 

noncompliance issues included the following:

However, this oversight was not fully effective because 

neither VA nor VHA ensure that corrective action is taken to address 

noncompliance.

• VA oversight: In February 2013, VA’s Office of Acquisition and 

Logistics began assessing compliance with its January 9, 2013, 

memorandum, which required VAMCs that had not fully implemented 

VHA’s new process for surgical implant purchasing over $3,000 to 

complete an abbreviated contracting package, including a fair and 

reasonable price determination and, if applicable, a JOFOC. This 

oversight effort, which examined several hundred purchases between 

February 2013 and August 2013, identified extensive noncompliance, 

 

31This oversight assessed compliance with prosthetics purchases over $3,000, not just 

surgical implants.

VA and VHA Did Not 

Ensure that 

Corrective Actions 

Were Taken when 

Noncompliance with 

Surgical Implant 

Purchasing 

Requirements Was 

Identified

VA and VHA Found 

Noncompliance with 

Requirements for Surgical 

Implant Purchases over 

$3,000 but Neither Took 

Steps to Ensure that 

Corrective Actions Were 

Taken
 

Page 23 GAO-14-146 VA Surgical Implant Purchasing

including inadequate fair and reasonable price determinations and 

missing or improperly completed JOFOCs, which were similar to the 

issues we identified in our assessment.

• VHA oversight: In April 2013, VHA began conducting oversight of 

surgical implant purchases over $3,000 for the seven NCOs (and the 

VAMCs associated with those NCOs) that had fully implemented the 

new process.32

While VA and VHA both conducted oversight and identified instances of 

noncompliance, they did not ensure that corrective action was taken. 

Consistent with the federal internal control standard for monitoring, which 

states that actions should be taken promptly in response to findings or 

recommendations, VA and VHA should have taken steps to ensure that 

noncompliance is addressed in a timely manner.

Additional oversight is planned for fiscal year 2014 for 

all NCOs. An audit team from VHA’s Procurement and Logistics Office 

is using a checklist consisting of nine questions, which assess various 

requirements of the purchasing process, such as whether the fair and 

reasonable price determination and a JOFOC, if applicable, is on file 

for each purchase. VHA’s oversight identified noncompliance 

including various missing or incomplete documentation in the 

contracting packages for surgical implant purchases over $3,000.

33

 

32VHA officials told us that VHA also conducted oversight in May 2012 and June 2012 of 

the three NCOs that had piloted the new purchasing process.

A senior official from 

VHA’s Procurement and Logistics Office told us that VA’s Office of 

Acquisition and Logistics did not provide VHA with information on the 

VAMCs at which noncompliance was identified, which—according to the 

official—would have allowed VHA to take steps to address 

noncompliance at the appropriate VAMCs. The official also told us that 

VHA’s oversight is largely intended to be consultative in nature and that 

VHA’s Procurement and Logistics Office is not sufficiently staffed to 

ensure that corrective action is taken. Therefore, while VHA asked NCOs 

to correct areas of noncompliance, VHA did not require NCOs to 

document how they addressed, or plan to address, noncompliance 

identified in VHA oversight activities. Because neither VA nor VHA have 

taken steps to ensure that corrective actions are taken to address VAMC 

and NCO noncompliance, they lack assurance that this noncompliance is 

being appropriately addressed.

33See GAO/AIMD-00-21.3.1 and GAO-01-1008G. 
 

Page 24 GAO-14-146 VA Surgical Implant Purchasing

VHA assesses how each VAMC within VHA’s 21 networks performs on 

metrics established for surgical implant purchasing, and provides the 

results of its assessments to the prosthetics representative at each 

network.34

• the extent to which VAMCs purchased surgical implants from a 

national committed-use contract or obtained a waiver allowing 

clinicians to use an alternative item;

According to VHA prosthetics officials, VHA’s assessments 

cover the following metrics:

• the extent to which VAMCs entered the serial number and lot number 

for each surgical implant purchase;

• the timeliness of each surgical implant purchase—that is, the time 

from which a clinician requests a surgical implant to the time the item 

is purchased;

• the extent to which clinicians’ purchase requests for surgical implants 

have been fulfilled; and

• the extent to which amounts obligated for surgical implant purchases 

have been recorded in the prosthetics purchasing system.

Network prosthetics representatives at two of the four networks we visited 

told us that they regularly monitored the results from VHA’s assessments 

and took steps to ensure that VAMCs address deficiencies VHA 

identified, such as correcting data entry errors. At the other two VAMCs, 

network prosthetics representatives did not take such steps. In both 

networks that did not ensure that VAMCs address deficiencies, VHA’s 

metrics identified a relatively high rate of noncompliance with surgical 

implant purchases from national committed-use contracts (28 percent at 

one network and 13 percent at the other network in the first three quarters 

of fiscal year 2013). At one of these networks, this noncompliance 

included a high percentage of purchases missing serial numbers or lot 

numbers (16 percent in the first three quarters of fiscal year 2013).35

 

34The network prosthetic representative in each of VHA’s 21 networks is responsible for 

supporting VHA in managing and overseeing VAMCs’ prosthetics service. VHA’s metrics 

cover all prosthetics, not just surgical implants.

The 

35VA has been developing a new system—called Veterans Implant Tracking and Alert 

System (VITAS)—for tracking and retrieving identifying information—including the lot and 

serial number—of surgical implants placed in patients. See appendix II for more 

information on VITAS.

VHA Assesses VAMCs’

Performance on Metrics 

Established for Surgical 

Implant Purchasing, but 

Has Not Required 

Networks to Ensure that 

VAMCs Address 

Deficiencies Identified
 

Page 25 GAO-14-146 VA Surgical Implant Purchasing

failure to address deficiencies uncovered through VHA’s assessments 

may lead to higher costs for VHA and may have patient safety 

implications. For example, not recording the serial number or lot number 

for a surgical implant makes it difficult to systematically determine which 

veteran received an implant subject to a subsequent manufacturer or 

Food and Drug Administration recall.

As of November 2013, VHA did not have a policy governing how 

deficiencies identified through these assessments should be addressed. 

Accordingly, VHA officials told us that they have not required VAMCs to 

address deficiencies—i.e., if VAMCs do not meet an established 

threshold for each metric—nor did they require network prosthetics 

representatives to do so. Consistent with the federal internal control for 

monitoring, VHA or networks should establish a process to ensure that 

deficiencies are addressed. According to VHA officials, the directive on 

surgical implant purchasing that VHA is developing will require network 

prosthetics representatives to review each metric and ensure that 

deficiencies are addressed.

To its credit, VHA has established national committed-use contracts for a 

number of surgical implants, which can help VHA effectively leverage its 

purchasing power. We found that an implant’s availability on this type of 

contract positively influenced clinicians’ decisions to use that implant, but 

these types of contracts are only available for a limited number of surgical 

implants. Establishing national committed-use contracts for a greater 

number of commonly used surgical implants could help reduce the 

number of open-market purchases of these items and ultimately reduce 

the costs for VA. Furthermore, steps could be taken to improve clinicians’ 

awareness of high quality surgical implants available on FSS contracts, 

which may also lead to a further reduction in open-market purchases.

While VHA has requirements in place to document surgical implant 

purchases from the open market, selected VAMCs did not fully comply 

with these requirements and VA and VHA’s own oversight found similar 

issues at other VAMCs nationwide. Greater compliance with these 

requirements would provide VHA with information needed to determine 

why VAMCs are purchasing surgical implants from the open market; it 

would also help provide assurance that VHA is paying a fair and 

reasonable price for surgical implants.

Conclusions
 

Page 26 GAO-14-146 VA Surgical Implant Purchasing

VA’s and VHA’s oversight of compliance with surgical implant purchasing 

requirements does not ensure that corrective action is taken to address 

identified noncompliance, which could lead to potentially serious issues 

remaining unaddressed. For example, while VHA identified that at one 

VAMC a high number of serial numbers for surgical implants were not 

recorded—as required—in the prosthetics purchasing system, VHA did 

not ensure that this problem was addressed, resulting in potential patient 

safety issues remaining unresolved. Providing effective oversight of 

surgical implant purchasing, which includes ensuring that noncompliance 

is addressed, would help VA and VHA improve compliance with its 

applicable requirements, while potentially lowering costs for surgical 

implants, and improving patient safety.

To expand the volume of surgical implants purchased from existing, 

higher-priority contracts and to improve compliance and oversight related 

to purchasing requirements, we recommend that the Secretary of the 

Department of Veterans Affairs take the following five actions:

• Create a plan that includes timelines for evaluating the benefits of 

developing additional national committed-use contracts for surgical 

implants and establishing these contracts.

• Explore options to increase clinicians’ awareness of high quality 

surgical implants available on FSS contracts, including developing a 

user-friendly list for VAMC clinicians of surgical implants available on 

FSS contracts for each surgical specialty.

• Re-emphasize to VAMCs that waivers must be completed for openmarket purchases of surgical implants, provide clear guidance to 

VAMCs on when and how to complete these waivers, and establish 

internal controls to ensure VAMCs’ compliance with waiver 

requirements.

• Provide additional training to VAMCs and NCOs on how to properly 

document open-market purchases of surgical implants over $3,000, 

including those awarded on a sole-source basis.

• Enhance information sharing on noncompliance between VA and VHA 

and revise existing guidelines to require that VAMCs and NCOs 

document the measures they are taking to address noncompliance 

and report their progress (via corrective action plans) in achieving 

those measures through the VHA and VA management chains of 

command.

Recommendations for 

Executive Action
 

Page 27 GAO-14-146 VA Surgical Implant Purchasing

VA provided written comments on a draft of this report, which we have 

reprinted in appendix III. In its comments, VA generally agreed with our 

conclusions, concurred with our five recommendations, and described the 

department’s plans for implementing each of our recommendations. For 

example, VA will create a plan for evaluating the benefits of developing 

additional national committed-use contracts for surgical implants; develop 

and disseminate a list of surgical implants available on FSS contracts; 

emphasize the FSS waiver process through webinar trainings and 

standard operating procedures guidance; develop a checklist for proper 

documentation of open-market surgical implant purchases over $3,000; 

and require documentation of measures taken to address noncompliance 

identified in audits. VA also provided a technical comment, which was 

incorporated as appropriate.

We are sending copies of this report to appropriate congressional 

committees and the Secretary of Veterans Affairs. The report is also 

available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or williamsonr@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs are on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix IV.

Randall B. Williamson

Director, Health Care

Agency Comments
Appendix I: Scope and Methodology

Page 28 GAO-14-146 VA Surgical Implant Purchasing

To conduct our work, we visited Department of Veterans Affairs (VA) 

medical centers (VAMC) in four locations: Indianapolis, Indiana; Los 

Angeles, California; New York, New York; and Seattle, Washington. We 

selected these four VAMCs because they are all classified by the 

Veterans Health Administration (VHA) as surgically complex facilities, 

serve large veteran populations and are located in different regional 

networks (See table 2).1

Table 2: Characteristics of VA medical centers (VAMC) Selected for Site Visits

VAMC location Patient population served, 2011 Network number

Indianapolis, Indiana 59,372 11

Los Angeles, California 84,436 22

New York, New York 75,860 a 3 a

Seattle, Washington 87,483 20

Source: GAO analysis of VHA data.

a

To examine the factors clinicians consider when choosing which surgical 

implant to use, when multiple, similar types of implants are available, at 

each of the four VAMCs, we interviewed at least one clinician from each 

of the following six clinical specialties that typically use surgical implants: 

cardiology or cardiac surgery; general surgery; orthopedic surgery; 

neurosurgery; podiatry; and vascular surgery. In total, we interviewed 

28 clinicians. During each interview, we discussed the factors that 

affected clinicians’ surgical implant purchase decisions and their 

knowledge of surgical implants available on national committed-use 

contracts and federal supply schedule (FSS) contracts. In addition, we 

interviewed staff involved in managing surgical implants at the VAMCs, 

such as the operating room nurse manager, surgical implant coordinator, 

or sterile processing service technician.

We visited both the Bronx and New York Harbor VAMCs. We are treating these locations as one site 

visit, because, due to their close proximity, certain clinical specialties are only represented at one 

location. We reported the total patient population for both locations. In 2011, the Bronx VAMC served 

24,625 patients and the New York Harbor VAMC served 51,235 patients.

To assess compliance at the four selected VAMCs with pertinent VHA 

requirements for documenting surgical implant purchases from the open 

market, we first identified the applicable requirements. To do so, we 

 

1

VAMCs are categorized according to complexity level, which is determined on the basis 

of characteristics of the patient population, clinical services offered, and other factors.

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 29 GAO-14-146 VA Surgical Implant Purchasing

reviewed VA’s statutory authority to acquire prosthetics—including 

surgical implants, applicable federal regulations—including the Federal 

Acquisition Regulation (FAR) and VA Acquisition Regulation (VAAR) and 

implementing guidance issued by VA and VHA with respect to surgical 

implant purchasing.2

• To assess compliance with the requirement that a waiver be obtained 

and approved by the VAMC Chief of Staff for open-market purchases 

of non-biological implants, for which a comparable product is available 

on a national committed-use contract, we selected 20 purchases at 

one VAMC and 30 purchases at another VAMC made between 

October 2012 and March 2013 for which data from VHA’s National 

Prosthetics Patient Database (NPPD) indicated that such a waiver 

was obtained.

To learn more about VA’s and VHA’s surgical 

implant purchasing processes and, in particular, surgical implant 

purchases from the open market, we also interviewed procurement and 

prosthetics officials at VA and VHA. For purposes of our review, we 

selected pertinent VHA requirements for documenting surgical implant

purchases from the open market. We assessed compliance with these 

requirements at the four selected VAMCs as follows:

3 These selected purchases represented about 35 and 

80 percent, respectively, of all applicable purchases at each VAMC 

during this time period. We subsequently reviewed whether those 

waivers were, in fact, on file at the two VAMCs and whether they were 

complete. We selected the purchases for our review to obtain a 

diverse selection of purchases from different vendors.4

 

2

The FAR contains government-wide regulations and establishes uniform policies and 

procedures used by all executive branch federal agencies for their acquisitions. VA 

supplements the FAR with the VAAR to establish uniform policies and procedures for all 

VA acquisitions. The FAR and agency supplements are codified in title 48 of the Code of 

Federal Regulations. With respect to VA’s and VHA’s implementing policies for surgical 

implant purchases, we reviewed, for example, VA Handbook 7408.1, Requesting Waivers 

From the Requirement to Use VA Federal Supply Schedules (June 9, 2005); and VHA 

Directive 2009-062, Management of Non-Biological Implantable Devices (Nov. 23, 2009).

At the two 

3

We selected a maximum of 5 purchases per month, between October 2012 and March 

2013.

4

The NPPD is a database containing information on each surgical implant purchase that is 

recorded by prosthetics purchasing agents and contracting officers in each VAMC’s 

prosthetics purchasing system. The prosthetics purchasing system allows staff to indicate 

whether a waiver is on file for an open-market purchase of a non-biological implant for 

which a comparable item is available on a national committed-use contract. We reviewed 

20 and 30 non-biological implant purchases at the two VAMCs, which ranged in price from 

$1,496 to $22,500 and included various types of non-biological implants, such as artificial 

joints and cardiac pacemakers.
Appendix I: Scope and Methodology

Page 30 GAO-14-146 VA Surgical Implant Purchasing

other VAMCs we visited, the NPPD data indicated that no waivers had 

been obtained, even though there were open-market purchases of 

non-biological implants, for which an alternative product was available 

on a national committed-use contract. At these two VAMCs, we 

interviewed VAMC and network prosthetics staff about why the 

waivers had not been obtained.

• To assess compliance with the requirement that a waiver be obtained 

when a decision is made to purchase a biological implant from the 

open market rather than from a Federal Supply Schedule (FSS) 

contract, at each VAMC, we selected 20 to 30 purchases of biological 

implants made between October 2012 and March 2013 which, based 

on NPPD data, appeared to have been purchased from the open 

market because the NPPD data did not indicate the purchase was 

associated with a contract, and assessed whether a waiver was on file 

for those purchases, and if so, whether the waiver was complete.5 We 

selected the purchases for our review to obtain a diverse selection of 

purchases from different vendors.6 We selected 110 purchases in 

total representing from about 9 percent to about 83 percent of all 

applicable purchases meeting our selection criteria at each VAMC 

during this time period.7

• To assess compliance with VHA’s requirements for open-market 

surgical implant purchases over $3,000, including (1) a statement 

affirming that the vendor’s quoted price is fair and reasonable and 

(2) a justification for other than full and open competition (JOFOC) in 

the case of a sole-source award, we reviewed a selection of openmarket purchases over $3,000 from each VAMC to determine whether 

the required documentation was on file and whether it was complete. 

At three of the four VAMCs, which had implemented VHA’s new 

 

5

We selected a maximum of 5 purchases per month, between October 2012 and March 

2013.

6

We identified open-market purchases in the NPPD by searching for purchases without a 

contract number. Prosthetics purchasing agents and contracting officers enter the contract

number in the prosthetics purchasing system for any surgical implant purchase made from 

a contracted source. At one VAMC, only 20 purchases met our selection criteria, and we 

reviewed all 20 of these purchases. At the other 3 VAMCs we selected 30 purchases 

each. The biological implant purchases we reviewed at the four VAMCs ranged in price 

from $66 to $11,473 and included various types of biological implants, such as bone grafts 

and cornea replacements.

7

The range in percentages is the result of large differences in the number of open market 

purchases of biological implants at each VAMC.
Appendix I: Scope and Methodology

Page 31 GAO-14-146 VA Surgical Implant Purchasing

process for surgical implant purchases over $3,000 by the beginning 

of fiscal year 2013, we selected 30 purchases made between October 

2012 and March 2013 which, based on NPPD data, appeared to have 

been purchased from the open market because the NPPD data did 

not indicate that the purchase was associated with a contract.8

To ensure that the NPPD data we used to select purchases for review 

were sufficiently reliable for our purposes, we conducted a data reliability 

assessment of the data that we used, which included checks for missing 

values and interviews with a VHA official knowledgeable about the data. 

We restricted these assessments, however, to the specific variables that 

were pertinent to our analyses. Our review revealed some inconsistencies 

and errors in the data that were attributable to data entry errors and 

omissions. Overall, however, we found that all of the data were 

sufficiently reliable for selecting our purchases for review. We cannot 

generalize our findings on compliance beyond the purchases we 

reviewed.

At the 

fourth VAMC, we selected 15 purchases made between January 9, 

2013, and March 31, 2013, which, based on NPPD data, appeared to 

have been purchased from the open market, because this VAMC had 

not yet implemented VHA’s new process for surgical implant 

purchasing over $3,000 and therefore was not required to complete 

the VHA requirements until January 9, 2013. We selected the 

purchases for our review to obtain a diverse selection of purchases 

from different vendors. We selected 97 purchases in total 

representing from about 6 percent to about 8 percent of all applicable 

purchases at each VAMC during this time period.

We also reviewed documentation and interviewed VAMC and network 

officials at the four VAMCs we visited regarding compliance with these 

requirements.

 

8

We selected a maximum of 5 purchases per month, between October 2012 and March 

2013. We identified open-market purchases in the NPPD data by searching for purchases 

without a contract number. Based on the documentation we reviewed at each VAMC, we 

found that some of the purchases we selected were actually made from a contractedsource, but that the contract number was not entered, and we excluded these purchases 

from our review. After excluding these purchases, we reviewed between 15 and 28 

purchases at each of the VAMCs we visited. These purchases ranged in price from 

$3,019 to $20,310 and included various types of surgical implants such as stents and 

heart valves.
Appendix I: Scope and Methodology

Page 32 GAO-14-146 VA Surgical Implant Purchasing

To examine VA and VHA’s oversight of compliance with surgical implant 

purchasing requirements, we obtained and analyzed VA and VHA 

documentation on existing or planned monitoring activities, including audit 

plans and reports documenting deficiencies in VAMCs’ purchasing of 

surgical implants; interviewed VA and VHA procurement and prosthetics 

officials; and assessed VA and VHA’s monitoring activities in the context 

of federal standards for internal control.9

We conducted this performance audit from April 2013 to January 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

The internal control standard for 

monitoring refers to an agency’s ability to assure that ongoing review and 

supervision activities are conducted, with the scope and frequency 

determined by the level of risk; deficiencies are communicated to at least 

one higher level of management; and actions are taken in response to 

findings or recommendations within established timelines.

 

9

These standards provide an overall framework for establishing and maintaining internal 

control and for identifying and addressing major performance and management 

challenges and areas at greatest risk of fraud, waste, abuse, and mismanagement. See 

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: Nov. 1, 1999) and its supplemental guide, Internal Control 

Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.: Aug. 1, 2001).
Appendix II: Veterans Implant Tracking and 

Alert System

Page 33 GAO-14-146 VA Surgical Implant Purchasing

According to Veterans Health Administration (VHA) officials, in 2008, the 

Department of Veterans Affairs’ (VA) Office of Information Technology 

began developing the Veterans Implant Tracking and Alert System 

(VITAS), which was designed to track and retrieve identifying 

information—including the lot and serial number—of surgical implants 

placed in patients VHA-wide. VITAS was developed to address 

shortcomings in VHA’s existing ability to track surgical implants, which 

may limit VHA’s ability to identify and locate patients who received an

implant in the event of a manufacturer or Food and Drug Administration 

recall. According to VHA, these shortcomings include the following:

• As we noted previously in this report, the lot number and serial 

number of items implanted in patients is not always entered into the 

prosthetics purchasing system, as required.

• While VHA clinicians from most specialties track identifying 

information of items implanted in their patients using standalone 

systems or spreadsheets that are particular to the clinicians’ 

specialties, VA found that information on surgical implants recorded in 

these systems is not standardized nor is it shared across VAMCs. 

Furthermore, VA found that identifying information on surgical 

implants used in certain clinical specialties, including 

gastroenterology, interventional radiology, and pulmonary, is not 

tracked in any system.1

According to VA and VHA officials involved in the development of VITAS, 

the development of this system was suspended as of the end of fiscal 

year 2012 due to data-reliability and interoperability challenges. As of 

December 2013, VA and VHA had not decided whether to resume the 

development of VITAS.

 

1

According to VA, for these clinical specialties VHA was unable to verify that the items 

purchased by the prosthetics department were actually implanted in the patients for which 

they were purchased. 

Appendix II: Veterans Implant Tracking and 

Alert System
Appendix III: Comments from the Department 

of Veterans Affairs

Page 34 GAO-14-146 VA Surgical Implant Purchasing

Appendix III: Comments from the 

Department of Veterans Affairs
Appendix III: Comments from the Department 

of Veterans Affairs

Page 35 GAO-14-146 VA Surgical Implant Purchasing
Appendix III: Comments from the Department 

of Veterans Affairs

Page 36 GAO-14-146 VA Surgical Implant Purchasing
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 37 GAO-14-146 VA Surgical Implant Purchasing

Randall B. Williamson, (202) 512-7114 or williamsonr@gao.gov

In addition to the contact named above, Kim Yamane, Assistant Director; 

Ashley Dixon; Cathleen Hamann; Jennifer Whitworth; and Michael Zose 

made key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(291119)
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