U.S. GOVERNMENT PUBLISHING OFFICE

31–432 WASHINGTON : 2019

NEW NAMES, SAME PROBLEMS: THE VA MEDICAL 

SURGICAL PRIME VENDOR PROGRAM 

HEARING 

BEFORE THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

THURSDAY, DECEMBER 7, 2017 

Serial No. 115–40 

Printed for the use of the Committee on Veterans’ Affairs 

( 

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

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(II) 

COMMITTEE ON VETERANS’ AFFAIRS 

DAVID P. ROE, Tennessee, Chairman 

GUS M. BILIRAKIS, Florida, Vice-Chairman 

MIKE COFFMAN, Colorado 

BRAD R. WENSTRUP, Ohio 

AMATA COLEMAN RADEWAGEN, American 

Samoa 

MIKE BOST, Illinois 

BRUCE POLIQUIN, Maine 

NEAL DUNN, Florida 

JODEY ARRINGTON, Texas 

JOHN RUTHERFORD, Florida 

CLAY HIGGINS, Louisiana 

JACK BERGMAN, Michigan 

JIM BANKS, Indiana 

JENNIFFER GONZALEZ-COLON, Puerto 

Rico 

TIM WALZ, Minnesota, Ranking Member 

MARK TAKANO, California 

JULIA BROWNLEY, California 

ANN M. KUSTER, New Hampshire 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

J. LUIS CORREA, California 

KILILI SABLAN, Northern Mariana Islands 

ELIZABETH ESTY, Connecticut 

SCOTT PETERS, California 

JON TOWERS, Staff Director 

RAY KELLEY, Democratic Staff Director 

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 

Thursday, December 7, 2017 

Page 

Overcoming PTSD: Assessing VA’s Efforts To Promote Wellness And Healing . 1 

OPENING STATEMENTS 

Honorable David P. Roe, Chairman ....................................................................... 1 

Honorable Timothy J. Walz, Ranking Member ..................................................... 3 

WITNESSES 

Mr. Ricky Lemmon, Acting Chief, Procurement and Logistics Officer, Veterans Health Administration, U.S. Department of Veterans Affairs .............. 5 

Prepared Statement ......................................................................................... 32 

Accompanied by: 

Mr. Phillip Christy, Acting Executive Director, Office of Acquisition Operations, U.S. Department of Veterans Affairs 

Ms. Shelby Oakley, Director, Acquisition and Sourcing Management, U.S. 

Government Accountability Office ...................................................................... 6 

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

Mr. Roger Waldron, President, The Coalition for Government Procurement .... 8 

Prepared Statement ......................................................................................... 41 

STATEMENTS FOR THE RECORD 

AdvaMed ................................................................................................................... 57 

MATERIAL SUBMITTED FOR FOR THE RECORD 

GAO Powerpoint Chart ........................................................................................... 60 

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NEW NAMES, SAME PROBLEMS: THE VA MEDICAL SURGICAL PRIME VENDOR PROGRAM 

Thursday, December 7, 2017 

COMMITTEE ON VETERANS’ AFFAIRS, 

U. S. HOUSE OF REPRESENTATIVES, 

Washington, D.C. 

The Committee met, pursuant to notice, at 10:00 a.m., in Room 

334, Cannon House Office Building, Hon. David P. Roe [Chairman 

of the Committee] presiding. 

Present: Representatives Roe, Bilirakis, Coffman, Wenstrup, 

Bost, Poliquin, Dunn, Arrington, Higgins, Bergman, Banks, Walz, 

Takano, Kuster, Correa, Sablan, Peters. 

OPENING STATEMENT OF DAVID P. ROE, CHAIRMAN 

The CHAIRMAN. Good morning. This hearing will come to order. 

I want to welcome everyone today to the hearing examining VA’s 

Medical Surgical Prime Vendor, or MSPV Program. 

And before we get started, I want to just take a moment and remember what happened 76 years ago today at Pearl Harbor in Hawaii, where 2,403 Americans were killed, 1,178 were wounded during the surprise attack on Pearl Harbor. And I had family that— 

in my family that served there and Hawaii immediately after that. 

So it is what brought America into World War II. So I just wanted 

to take a moment and remember that, those lost Americans. And 

I am sure many of you visited the memorial there and it is really 

a very moving experience to do that. 

I will continue now. Our MSPV is a system of contracts consisting of suppliers and what are called prime vendors that VA has 

used for over a decade to purchase and distribute medical and surgical supplies in a just-in-time inventory system. The prime vendors handle all logistics in their assigned regions to get supplies to 

the medical center door. The suppliers provide the items selected 

by VA to the prime vendors. 

Many of you may remember our earlier hearing on the issue in 

September of 2016. At that time, VA was about to launch the 

MSPV Next Generation or NG Program. Whereas the older version 

of MSPV had never sought to limit the medical and surgical supplies that could be purchased, it never saved very much money either. NG is an aggressive attempt to simplify the supply chain and 

establish a medical surgical formulary containing a vastly reduced 

universe of products, initially 600,000, now roughly 10,000. 

The goal was to leverage VA’s buying power with fewer suppliers 

and items to achieve maximize savings. It was and remains a worleonard.horne on VACREP0180 with DISTILLER

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thy goal, but the medical surgical formulary represents a huge clinical cultural and operational shift. 

Last September, we expressed our reservations that the formulary and its underlying supplier contracts were far from ready. 

The timeline seemed like a stretch, clinical involvement seemed 

tentative and belated at best, and only a handful of competitive 

contracts were in place. Nonetheless, VA launched MSPV NG last 

December and that launch was rocky. The formulary omitted many 

necessary products and at the same time included more than a few 

erroneous items. VA recognized this and decided to keep the old 

MSPV program in place alongside NG through April. 

Since then, physicians, surgeons, and nurses have been put on 

teams and tasked to review the formulary, which was created with 

little clinical input. At one point, a group of clinicians was essentially put in a room for a week to concentrate on the task, but the 

formulary remains troubled. It seems the early decision to concentrate on every group of medical and surgical supply at one time 

continues to poison the effort. 

Meanwhile, a large number of sole-source supplier contracts were 

put in place to launch the formulary. They were intended to be 

short-term and replaced with competitive contracts. The competitive contracts remained elusive and VA finds itself continuously 

awarding new sole-source contracts to replace the old ones as they 

expire. The prices remain high and the contracting officer’s time is 

consumed by nonproductive activities. 

In the midst of these problems with NG, VA recently unveiled a 

new concept called MSPV 2.0. It entails outsourcing everything, including developing a formulary for every VHA veterans facility to 

one all-powerful prime vendor. While I absolutely believe there are 

many functions the private sector is best suited to perform, the 2.0 

model as it has been described does not seem to exist in the commercial market. Some things like deciding which medical surgical 

products it will buy are inherently the responsibility of a health 

care organization. I am also skeptical that given VA’s difficulty in 

coordinating formulary decisions among all its practitioners an external company would have a better experience. 

MSPV has created nervousness and frustration among VA employees, and many of the prime vendors and suppliers for years 

now, but the volume of complaints has lately become overwhelming. 

At the Committee’s request, GAO completed a wide-ranging report after reviewing the program for roughly a year, finding continual missteps and difficulties. The Coalition for Government Procurement has also submitted a white paper to VA with recommendations. 

I hope through our discussion today we can identify a viable path 

forward and make MSPV work and stop repeating the same mistakes. Whether we call it MSPV Next Generation, 2.0 or whatever, 

it has to make operational sense, work for clinicians, and be timely 

and safe for veterans. 

I now yield to Ranking Member Walz for his opening comments. 

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OPENING STATEMENT OF TIM WALZ, RANKING MEMBER 

Mr. WALZ. Thank you, Mr. Chairman, and I concur with much 

of the Chairman’s statement. I would also like to thank him for 

pointing out today Pearl Harbor. My favorite great uncle, Morris 

Ryeman [ph], was a fireman in the Navy in Pearl Harbor and it 

was a source of pride and family oral history about what he did 

there. So, thank you for that. 

Some of you have heard me, those who have been here for a long 

time, for the last 11 years I had a saying that I am the VA’s great 

advocate, but when need be, I will be their harshest critic. I will 

be in the harshest critic mode today. 

This program was set up for failure from the very beginning due 

to a lack of commitment and prioritization by senior VA leadership. 

It appears to be nearly incompetent in how it was done. If I were 

a conspiracy theorist, I would believe this is an intentional way to 

undermine the VA to force outsourcing and privatization. It looks 

that bad, especially when other hospital systems have been able to 

do it. VA knew about the best practices and chose to ignore them. 

And I want to be very clear about that: it appears that the choices 

were made to ignore what needed to be done. 

VA’s Medical Surgical Prime Vendor Program is clearly worse 

than it was 2 years ago. I don’t know how VA leadership at its 

highest levels thought an approach to managing this program 

would be successful. 

As the Chairman said, the previous formulary allowed forwarding hundreds of thousands of items by Federal supply, now 

the formulary contains 10,000 items. That in itself might not be a 

note of concern, but what the Chairman also said was they don’t 

meet the needs of the providers at the medical centers. They 

weren’t asked. This has forced medical centers to buy supplies with 

purchase cards through emergency contracts at added cost to taxpayers. 

And this afternoon we will talk to the Secretary about needing 

more money for the VA; that conversation cannot happen in a vacuum. Clinicians and medical centers know their supply needs. 

Large hospital systems have done this for decades. When you think 

about the program this way, it is simple in comparison to requiring 

something more complex like an electronic medical record. Think about that. We are going to be asked to spend $16 billion 

over nearly a decade on the Electronic Health Record Modernization Program. A project of this size with a requirement like that 

to be interoperable with other health care systems like DoD and 

community providers has never been done. I certainly support that 

decision, I have advocated for it for years, but VA’s failure to successfully implement the medical supply acquisition programs is 

simple in comparison to what we are going to be up against. It does 

not give me a whole lot of confidence that the VA is capable of successfully undertaking that complex acquisition of size and scope. 

This all points to a leadership failure. VA’s contracting and logistics organizations do not have permanent leadership. The MSPV 

Program Office lacks a leader, it is only half-staffed. President 

Trump’s hiring freeze prevented an acting director from filling in. 

I want to be clear, there were years here that every single VA 

person who sat there was responsible and was grilled on everything 

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that the President of the United States did. We have not taken 

that mode. We have taken a collaborative mode to getting things 

done, but I will have to tell you, that honeymoon is nearly over. 

The logistics contract program officers do not communicate and coordinate their efforts or work with stakeholders. The program has 

never had a strategic plan. 

This program was set up to fail and I want to hear today why 

that is not the case. VA has the potential to save at least $150 million, if it is done right. VA has enormous buying power it can leverage to negotiate lower prices by buying in bulk. Instead, it has 

caused more of a burden for providers. Contracting and logistics 

staff made it difficult for suppliers to do business with VA. 

VA could have done this properly by getting buy-in from its doctors, nurses, and clinical staff, the employees who provide care to 

veterans. Instead, VA cut corners and incorrectly assumed that orders of previous supply purchases met the needs. Medical centers 

were left in the dark about the formulary rollout and suppliers 

chose not to participate because doing business with VA was vastly 

different from how the medical supply industry does under industry standards. VA had to cancel the rest of the contract solicitations because of low supplier participation. 

VA knows what practices and best practices of their hospital systems follow. Instead, it overestimated its ability to successfully implement the program, and did not provide the leadership, staffing, 

and resources needed to make the formulary a success. Without 

Government’s leadership and buy-in from the stakeholders, VA’s 

programs will continue to fail. 

I want a commitment today from VA that it will take immediate 

action to turn this program around. This program needs bold leadership. A lot of work will need to be done to get provider buy-in. 

The same old way of managing won’t work. 

I would suggest this: how about start small? Find one category 

of supplies and use it as a beta test through your process to developing the formulary. Involve the providers and medical centers, solicit feedback from suppliers, include other stakeholders, apply lessons learned to the next category of supplies, and work to build the 

formulary right. This is Project Management 101 and it is also 

what DoD told you to do. 

This Committee is committed to ensuring VA is capable of providing world-class care to veterans and we are committing to helping VA get this effort right. And I want to thank the Chairman for 

once again being dogged on this issue, continuing to follow up, and 

making it clear that anything less than world-class won’t be accepted. 

I yield back. 

The CHAIRMAN. I thank the gentleman for yielding. 

I would now like to welcome our panel who are seated at the witness table. On our panel we have Mr. Ricky Lemmon, the Acting 

Chief Procurement and Logistics Officer for the Veterans Health 

Administration. Welcome. He is accompanied by Mr. Phillip 

Christy, Acting Executive Director of the Office of Acquisition Operations. Welcome. 

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Finally, we have Mr. Roger Waldron, President of the Coalition 

for Government Procurement. And we also have Ms. Shelby Oakley, Director of Acquisition and Sourcing Management at GAO. 

If you would, I will ask the witnesses to stand and raise your 

right hand. 

[Witnesses sworn.] 

The CHAIRMAN. Let the record reflect that the witnesses have answered in the affirmative. 

Mr. Lemmon, you are recognized for 5 minutes. 

STATEMENT OF RICKY LEMMON 

Mr. LEMMON. Good morning, Chairman Roe, Ranking Member 

Walz, and Members of the Committee. Thank you for the opportunity to discuss VA’s Medical Surgical Prime Vendor Program and 

the related Government Accountability Office report. 

I am accompanied by Mr. Phillip Christy, Associate Executive Director of the Strategic Acquisition Center. 

VA is committed to providing our veterans the best care available, while being good stewards of taxpayers’ dollars. Part of meeting these commitments is making sure that our medical centers 

have the right supplies and equipment to deliver the care our veterans need. 

In the mid-1990s, VA eliminated its in-house depot system and 

converted to a commercially-sourced med-surge prime vendor program to provide medical and surgical supplies. 

The primary source of supplies for previous generations of MSPV 

contracts were the Federal Supply Schedules. This approach resulted in our hospitals having access to a clinically viable selection 

of supplies, but this operational model did not facilitate clinical 

product decisions on a national level that would allow VHA to leverage its purchasing power. Adoption of clinically-driven strategic 

sourcing is VA’s objective under the existing med-surge prime vendor contract and any future med-surge prime vendor contracts. 

The current MSPV contract was conceived in part to leverage VA 

enterprise-wide purchase volume in order to drive lower prices and 

improve product quality through the development and use of a national catalog of products. While VA is committed to providing our 

veterans the best care available, we must do so while also being 

good stewards of taxpayers’ dollars. To achieve this, we must ensure that our medical centers have the right supplies and equipment to deliver the care our veterans need. 

In 2016, VA announced the award of four MSPV contracts. Product prices were primarily established by negotiated blanket purchase agreements against FSS contracts, VA national indefinite delivery contracts, and local contracts to support veterans integrated 

service networks. VA has decided to move forward with either 

modifying the current contracts or development of replacement contracts to rectify many of the issues identified by the GAO report. 

An acquisition plan has not yet been finalized for replacement of 

MSPV. VA is exploring a different approach to MSPV where potential prime vendors can propose a full catalog of medical and surgical products. This would depart from the current approach where 

individual contracts are negotiated with each supplier. 

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The potential benefits of MSPV replacement, known as 2.0, 

would be a more robust catalog of items than we have today and 

lower prices. Additionally, the administrative resources and time 

required to negotiate hundreds of individual contracts would be reduced if VA only negotiated with the prime vendors. 

There have been multiple meetings with industry leaders to obtain feedback regarding this approach to MSPV 2.0 and that feedback is currently being considered. Feedback will also be obtained 

from VA clinicians before any final decisions are made. 

This is why our efforts to make the current MSPV contracts 

more robust are important. We want to make sure the needs of our 

medical centers are met while we develop a better approach to 

MSPV. In GAO’s recently released report, they made ten recommendations concerning our current MSPV management processes and VA has already begun to institute each of them. 

VA seeks to continue to provide our veterans with the timely 

care they have earned and deserved, at the same time we are seeking new and innovative ways to be more responsible stewards of 

the taxpayers’ dollars. We are grateful to GAO for their report and 

to the Committee for their commitment to helping the Department 

improve. 

I look forward to responding to any questions you may have. 

Thank you. 

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

The CHAIRMAN. Thank you. 

Ms. Oakley, you are recognized for 5 minutes. 

STATEMENT OF SHELBY OAKLEY 

Ms. OAKLEY. Good morning, Mr. Chairman, Ranking Member 

Walz, and Members of the Committee. Thank you for having me 

here today to discuss VA’s implementation of its Medical Surgical 

Prime Vendor Next Generation Program, which I will call NG. 

NG is VA’s primary means for purchasing the supplies to meet 

the needs of its 170 medical centers that serve almost 7 million veterans. Some of the goals of NG are to standardize requirements for 

greater clinical consistency, leverage VA’s substantial buying power 

to achieve cost avoidance, and provide greater efficiency in supply 

chain management. 

Effective supply chain management is an essential element of delivering quality care to veterans. Recently, the VA IG found supply 

management issues at the D.C. VA Medical Center that posed risks 

to patient care. Our past work suggests that VA’s confusing and 

outdated procurement framework compounds issues like these and 

leaves the department without a sound basis for effective and efficient procurement activities to support patient care. 

As the Chairman mentioned, we released a report a few days ago 

on NG. We found that VA underestimated the significance of the 

change and lacked an overarching strategy, stable leadership and 

the workforce capacity that, if in place, could have facilitated buyin for the change. These shortcomings, among others, have kept VA 

from achieving the goals of the program to date. 

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Today, I will discuss three topics from that report: first, the challenges that VA faced in setting up NG; second, the effect these 

challenges had on the medical centers’ use of the program; and, 

third, VA’s efforts to address shortcomings in its future plans. 

First, I would like to point to a graphic that you might have seen 

in our report. It identifies practices that leading hospital networks 

follow in managing their supply chains which have resulted in significant cost savings and improved patient care. These practices include prioritizing categories of supplies based upon the likelihood 

of cost savings, working closely with medical staff to identify the 

right supplies to buy, and awarding competitive contracts to 

achieve the best prices. 

VA did not follow these same practices when implementing NG. 

It did not prioritize which categories of supplies to focus on first 

or work closely enough with medical staff. For example, VA developed its formulary based almost exclusively on flawed data on prior 

purchases and not on input from medical staff. This flawed approach for determining what items to buy led VA to take actions 

directly in conflict with the goals of the program and the practices 

of leading hospitals. For example, VA resorted to noncompetitive 

agreements for 79 percent of the items on the formulary to meet 

its December 2016 date to get NG up and running. 

Given how far VA strayed from leading practices in setting up 

the formulary, it should come as no surprise that the items on the 

formulary did not meet the needs of the medical centers or enable 

the Department to leverage its significant buying power. 

VA has taken some steps to address the shortcomings with the 

rollout of NG, but continues to struggle with implementation. Specifically, VA included medical staff in its second round of requirements development. However, it relied on just a small group of 

medical staff to review more than 4,000 products in 1 weeks’ time 

representing almost half of the formulary. This approach limited 

their ability to standardize requirements for the formulary. 

VA is likely changing its approach to MSPV yet again. It is considering hiring a prime contractor not only to provide distribution 

services, as they do now, but also to develop and manage the formulary. Many details remain unclear with VA’s new approach, but 

it wouldn’t be safe for VA to assume that simply changing its approach will solve the challenges it encountered thus far. 

We recommended several steps that VA could take to overcome 

some of these challenges such as developing and communicating a 

consistent strategy for NG, prioritizing efforts by supply category, 

involving medical staff every step along the way, and ensuring stable leadership at all levels of the effort. NG could save both money 

and enhance services to veterans, but only if VA can get the execution right. Until VA takes steps to address some of the challenges 

we identified in our report, it will continue to struggle with implementation. 

Mr. Chairman, Ranking Member Walz, this concludes my remarks. I am happy to answer any questions you have. 

[THE PREPARED STATEMENT OF MS. OAKLEY APPEARS IN THE APPENDIX]

The CHAIRMAN. Thank you, Ms. Oakley. 

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Mr. Waldron, you are recognized for 5 minutes. 

STATEMENT OF ROGER WALDRON 

Mr. WALDRON. Chairman Roe, Ranking Member Walz, and Committee Members, thank you for the opportunity to appear before 

you today. 

The Coalition is a non-profit association of small, medium and large business concerns representing more than $145 billion in annual Government sales, including more than $12 billion in medical 

surgical products and pharmaceuticals supporting veterans’ health 

care. Today my remarks summarize my written testimony, which 

I ask be included in the record. 

The Prime Vendor Program serves as the brains of the VA’s logistic operations because it touches essentially all critical VA 

health care operations and contractors. It is responsible for developing and communicating the med-surge formulary and thus serves 

as a bridge connecting requirements holders, the VISNs, hospitals, 

and health care providers serving veterans, and the VA procurement professionals and contractors. 

Given this critical role, it is imperative that the Prime Vendor 

Office be led and managed by clinicians. A clinical-led program office is a fundamental commercial best practice and it is our understanding that the MSPV Program is the only medical supply chain 

in the VA and DoD that currently is not led by either clinicians or 

medical supply chain experts. 

This structure has contributed increased inefficiencies and generated medical care concerns. Our members are seeing an incomplete formulary, which causes supply shortages, leaving facilities 

with no choice but to purchase items on the open market, often at 

sub-optimal prices. 

Clinical leadership will result in well-defined requirements, 

thereby avoiding these problems and supporting delivery of bestvalue health care. Without this leadership, many of the challenges 

of the Prime Vendor Program will continue into the next generation with strategies and decisions that too often are driven primarily by acquisition process needs rather than veterans’ health 

care needs. 

Turning to the next iteration, the MSPV 2.0 essentially envisions 

outsourcing the program to a single super prime vendor that would 

determine what the agency buys and how the items sought will be 

sourced. The super prime vendor would develop the formulary, 

manage and distribute items, administer subcontracts, and ensure 

quality control. Nationwide electronic ordering and invoicing would 

be facilitated using the super prime vendor’s e-commerce platform. 

Coalition members report no comparable commercial model that 

delivers the extensive scope of management services and med-surge 

items contemplated by 2.0. 

Although our members support improving the Prime Vendor Program, the 2.0 initiative has generated significant confusion. With 

the needs of more than 9 million veterans in the balance, the Coalition believes that prior to any decision to shift to a new commercially untested platform, the VA should undertake a thoroughly 

vetted and methodical approach with ongoing evaluations over time 

to ensure success. 

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We also note that the 2.0 vision would give rise to an inherent 

business conflict as one company would be responsible for both developing the formulary and delivering the items listed on it. The 

Coalition is concerned that this structure risks incentivizing contractor formulary decisions based on vendor financial incentives 

rather than best interest of patients. 

Similarly, the current proposal stipulates that cost savings will 

be a significant objective for the 2.0 program. If this objective 

translates into low cost technically acceptable veterans’ care, however, it would be inconsistent with the VA’s mission, the expectation of our veterans, and the interests of the American people. For 

this reason, Coalition members also believe that the VA must clearly assert that value, not low price, is the objective when acquiring 

medical equipment and supplies for our Nation’s veterans. 

Finally, we are concerned that by focusing on a single-vendor approach, the 2.0 proposal fails to adequately leverage competition 

necessary to bring innovation to our veterans’ health care. Further, 

2.0 places no discernible checks on the super prime vendor; rather, 

it cedes inherently governmental discretion and authority to a private entity. From a program perspective, vesting a single contractor with too much authority has negative implications for Government and industry regarding market power, the Government’s 

ability to replace a non-performing prime vendor, and the ability of 

the private sector, including service-disabled veteran-owned firms, 

to either contract with the VA directly or be subcontractors to the 

super prime vendor. 

The Coalition believes that there is a path to success here, starting with assuring that the Prime Vendor Program Office is led and 

managed by clinicians; that inherently governmental decisions are 

not outsourced to a super prime vendor; that conflicts of interest 

are avoided; and that market competition is leveraged appropriately to access innovation for veterans. 

Chairman Roe and Ranking Member Walz, thank you again for 

the opportunity to address the Committee, and I look forward to 

answering questions. 

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

The CHAIRMAN. Thank you, all of you all, and for remaining 

within the 5-minute timeframe. I will try to do the same and I will 

start the questioning. 

And just sort of open that large medical centers do this all the 

time. This is not putting the Voyager III up. This is how we as clinicians are able to practice every day. The vendors and the hospital 

provides the products and tools necessary for us to provide care 

and do our jobs. 

Just the first question, Mr. Lemmon, has the VA had cases, surgical cases cancel because of a lack of needed equipment? 

Mr. LEMMON. I probably have to take that question for the 

record. I do believe there has been a very small number, but I 

would want to research that and get back with you. 

The CHAIRMAN. That’s fair enough. I know we have heard that 

there have been cases cancelled. 

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In my 31 years of practice, I was trying to remember as you all 

were testifying, I don’t ever remember a case being cancelled because I didn’t have the supplies I needed to do the case. We knew 

ahead of time, unless it is an emergency, and those cases were 

scheduled a week, 2 weeks, 3 weeks, a month ahead. The surgical 

team and the hospital team went right ahead and made sure I had 

every bit of equipment. I have had the surgical nurses call me and 

say, Dr. Roe, do you need this, this, and this before this procedure, 

and we would go over that ahead of time. 

And that is why clinicians have to be involved in this, because 

they are the only ones that know when they are in those situations 

what tools they need. And I don’t expect someone else to know 

that, but I do expect them to ask me, so that they can—that you 

in the supply chain can provide it for me. 

I think that the other question I have, the second question I have 

is, who decided—and I am not necessarily saying this is bad, but 

who decided to go with a program that has never been done with 

an organization that doesn’t exist? 

Mr. LEMMON. Well, that decision, it has not been made. 

The CHAIRMAN. So, the 2.0 is not—I mean, I am not saying it is 

bad, I am just asking the question. 

Mr. LEMMON. Yeah, it is a concept that is being explored, but 

there has not been any decision to go forward with 2.0. 

The CHAIRMAN. Okay. So during this exploration, what exactly is 

VA doing to—because this is critical for patient care, there is no 

question, and I know there is a lot of work that goes on behind the 

scenes before I show up gowned and gloved in an operating room, 

getting ready to make an incision. 

So is the system that we have gone to, we have gone from 

500,000 different items on there to 10,000 or so items on there, are 

the clinicians, the nurses, the providers being given in a timely 

fashion the tools they need to do their job? 

Mr. LEMMON. Generally, the answer is yes, but because of the 

limited formulary it is not being done nearly as efficiently as it 

could be. So, there is an imperative on the part of our office working with clinicians and the strategic acquisition center to make the 

formulary more robust. 

The CHAIRMAN. I know how—and, Ms. Oakley, I want to ask you 

this question, because my time is running out, can you explain how 

the formulary was developed and ultimately who makes the decision about who is on there? That is Ms. Oakley. 

Ms. OAKLEY. Sure. As I understand it, VA began the formulary 

development effort by running what is called a spend analysis on 

purchase data, supply purchase data. And documentation that I 

have seen indicates that this was deemed sufficient to have clinical 

input, because the physicians and clinicians voted with their dollars by making prior purchases. Unfortunately, what wasn’t recognized was that this data wasn’t the best data to use and it didn’t 

reflect all the things that the medical centers needed to use on a 

daily basis. 

And so that provided the basis of the initial formulary and the 

logistics office began writing requirements based upon that spend 

analysis with limited input from clinicians. And what resulted was 

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more manufacturer-specific requirements than general requirements that more than one manufacturer could meet. 

The CHAIRMAN. So this was basically built from the top down— 

Ms. OAKLEY. From the top down. 

The CHAIRMAN [continued]. —not the bottom up? 

Ms. OAKLEY. From the very beginning, the faulty process from 

the very beginning kind of flowed down throughout all of the subsequent actions that impacted how useful the formulary was. 

The CHAIRMAN. This would have taken some time, but if I had 

been building that model, I would have done it just the opposite. 

I would have gotten that information, but I would gone down to my 

clinicians and said, what do you need to do your job? On the nursing floor and whatever. And then I would have built it up this way 

medical-center-by-medical-center and then seen how that data 

meshed. 

Would that seem reasonable? 

Ms. OAKLEY. That is in fact what we found when we talked to 

leading hospital networks is that the basis of all of their efforts is 

involving clinicians and including them from the very beginning as 

a part of the process. 

The CHAIRMAN. Thank you. My time has expired. 

Mr. Walz? 

Mr. WALZ. And thank you, Mr. Chairman. 

I would like to associate myself with the Chairman’s question 

about have there been delays, affected patient outcomes, cancelled 

medical procedures, or other issues to patient access. So if you 

would take questions too, I would like both of us to be addressed 

by this. 

For all the members who are new here, again, this Committee, 

we have addressed this before. And we said in here and I listened 

to the testimony a year and a half, 2 years ago, and the abject failure of President Obama and Secretary McDonald to fix this program, we were going to do something about it. Here we sat, it is 

right here. 

Now, keep in mind that the suggestion to be made is to allow the 

private sector to fix it. There is no one in the private sector to do 

this. 

So, this is our responsibility, these are questions that have been 

brought up before, this is—as I said in my opening statements, 

there is an abject failure in leadership to get this right. We are 

going to get responses back that there were adverse impacts on veterans, so I fully would expect the outrage to be equally strong as 

it was 2 years ago when we talked about this as it is today. And 

at this point in time, I think what is different is, we are going to 

look for some answers on how to fix that. 

So, if it is a lack of leadership, how come we don’t have anybody 

in leadership positions in the Procurement and Logistics Office, 

Medical Surgical Prime Vendor Program office, and, more importantly, the Chief Acquisition Officer; how come that is not filled, 

Mr. Lemmon? 

Mr. LEMMON. Well, the Chief Acquisition Officer, that was filled 

by Greg Giddens was Acting, he just retired at the end of November. With the Chief Procurement and Logistics Office position, I 

know that leadership is looking at that. 

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12 

I think part of the modernization effort in determining how those 

functions would be aligned within the Department has kept from 

making a decision to permanently fill that position or recruit it, but 

it does need to happen. I have been acting for some time. 

We also are recruiting the program manager for our health care 

team that will oversee Prime Vendor, that announcement is on the 

street. We have had prior attempts that were unsuccessful to hire 

that position. We have also had some hiring freezes that we have 

dealt with, but— 

Mr. WALZ. So what exactly does that mean? We are not getting 

supplies to people, we have veterans waiting. Did you just tell me 

one of the potential reasons is because we have a hiring freeze that 

does not allow us to fill those positions? 

Mr. LEMMON. Within our program executive office structure 

where those positions that will do this work, we have been impacted by a hiring freeze at the headquarters level with those key 

positions. We have attempted to recruit the Health Care Commodities Program Manager and that position is now being advertised 

again. 

Mr. WALZ. Well, that is pretty disconcerting and I would hope 

there would be a concerted effort by this Committee to get to the 

bottom of that and to address that. It is simply not good enough 

to say we are going to cut Government freeze positions and get rid 

of them. When that initially came out, we had to start backing 

away from it. Oh, yeah, we will get the doctors. And then we said, 

well, what about the emergency room nurses? Oh, yeah, we will get 

the emergency room nurses. And then we said, what about the people who wash the sheets? Oh, yeah, we will take them off the 

freeze. You fall into that chain too. Everybody plays a role in this. 

So this lack of leadership position, I would go back, Ms. Oakley, 

with my remaining time, you said that this new approach won’t 

solve the problems. We are piloting this, you heard that, it is not 

on the street yet. Is there a retool to this or is this the wrong approach in general of what is being described with the Prime Vendor, the 2.0? Or should we retool and go back again, as I think the 

Chairman clearly and I think adequately said we are building at 

the wrong direction? 

Ms. OAKLEY. I think fundamentally the concept of MSPV NG as 

it stands now is solid, it was the execution that fell down. So I am 

not necessarily convinced that a complete reboot of the approach is 

necessary, especially given that some of the steps that VA could 

have taken to better implement the program are, you know, fairly 

common steps: include the clinician, communicate a strategy, make 

sure everybody understands their role in implementing this 

change. 

And I think, just to comment on the leadership, this is a huge 

shift for VA to an NG program and when you are talking about 

leadership vacancies from the CAO on down to the program office 

in the height of the transition to this new program, it is no wonder 

that there wasn’t a captain steering the ship at this point— 

Mr. WALZ. Yes. 

Ms. OAKLEY [continued]. —and it went a little off course. 

Mr. WALZ. Yes, very well said. 

I yield back. 

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13 

Mr. BILIRAKIS. [Presiding.] Yes, I recognize Dr. Dunn for 5 minutes. Thank you. 

Mr. DUNN. Thank you very much, Mr. Chairman. 

Let me start out by saying that I share the outrage that Mr. 

Walz has expressed. I am a surgeon and I have worked in a lot of 

hospitals, a lot of different systems, there are so many errors in 

judgment in the implementation of this that it takes your breath 

away. 

I want to start with a concept. The concept I want to start with 

is, you may delegate authority, but you may not delegate responsibility. Now, that is true in the military, it is also true in business, 

and it is certainly true in surgery. You know, the surgeon is the 

captain of the ship, he can authorize people to help him do different things in the operation and around the room, but he takes 

responsibility for it. And that certainly is true in any system of 

business and the VA included. 

So, remember, please remember that when we start talking 

about these super prime vendors and prime vendors and we are 

pretending like they are the ones whose responsibility it is to make 

this system work, it is your responsibility to make it work, and 

they are set up for failure. And they also set up and inveigled to 

do things that I think were certainly odious and bad behavior, but 

maybe illegal, and I want to ask you specifically about that. 

It was said that some prime vendors improperly, improperly substituted their own products for products that were offered by the 

contracted suppliers. In this context, does improper mean illegal, or 

does it just mean odious and wrong and bad behavior? Certainly 

there is a tort there; is there a crime? 

Mr. Waldron, maybe you can answer that best. 

Mr. WALDRON. That is a tough question. I think it would go back 

and depend on the nature of the transaction, and the agreement 

between the prime vendor and the hospital and what was actually 

ordered. If items are substituted for a brand name that was specifically ordered, then that would be an issue and that would be a 

problem under that particular contract. 

Mr. DUNN. Yeah, we can’t litigate it here, but you— 

Mr. WALDRON. Right. 

Mr. DUNN [continued]. —get the sense, this is wrong. I mean, it 

is very wrong behavior. And to then turn around and suggest that 

what we do is to concentrate all of this power in one of these super, 

super prime vendors is an appalling idea. 

Ms. Oakley has said she thought that the MSPV Next Gen, I 

guess, is a good idea, but failed in execution. Do you agree with 

that, Mr. Waldron? 

Mr. WALDRON. I do believe that the prime vendor program is 

foundationally a solid approach. DHS and DLA are successfully 

managing prime vendor programs right now. On the pharmaceutical side, the VA has run a very successful prime vendor program. It goes back to execution and it goes back to people. You 

can’t underestimate the importance of people. 

And the last thing I would just make that is kind of interesting. 

When I read the GAO report, one thing that struck me that just 

is the terminology used, for example, to identify the program office 

responsible for the formulary, it was the Health Care Commodity 

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14 

Executive Program Office. That term ‘‘commodity’’ I think again 

sends a message that these things are all interchangeable, that it 

is like pens and paper. 

Mr. DUNN. Well, we know as clinicians that they aren’t interchangeable. 

Mr. WALDRON. Right. 

Mr. DUNN. There are very, very subtle, but important differences 

in many of the different medicines and tools we use. 

Is the VA capable of implementing another prime vendor program, this one that would work, your opinion, Mr. Waldron? 

Mr. WALDRON. They have a long way to go. They need to put in 

place a clinician-led program office with medical supply chain experts to execute this, that is first and foremost. It boils down to requirements development: if you don’t have sound requirements development, you can’t support the health care providers who are 

serving our veterans. They need to put the people in place. 

I think the jury is out. We have spent—our members have spent 

the last two years, you know, trying to execute— 

Mr. DUNN. But the timeline on this is years, it is always years 

and years, and veterans are dying and being injured by us in each 

of those years. I mean, we can’t be measuring time in years. 

And I want to ask you one more in the few seconds left to me. 

We are all familiar with group purchasing organizations; in what 

way is this very different from a GPO, the MSPV? 

Mr. WALDRON. In a certain sense, it is similar with their idea of 

they are trying to leverage their requirements across hospitals and 

get better pricing, and consistency and tiered pricing. In that sense 

it is very similar, from my perspective; it again goes back to the 

execution. I think there is a way forward, we do believe there is 

a way of forward, but it starts with putting clinicians in place to 

manage the formulary— 

Mr. DUNN. Well, thank you for ending it, because my time is expired, ending with the clinicians, though. And, please, I beg you, 

go back and talk to your doctors, I mean, you have to do that. 

Mr. Chairman, thank you. I yield back. 

Mr. BILIRAKIS. Thank you, Dr. Dunn. 

Mr. Takano, you are recognized for 5 minutes. 

Mr. TAKANO. Thank you, Mr. Chairman. 

Mr. Lemmon, the GAO report highlighted challenges with staffing and I want to associate myself with Ranking Member Walz’s 

comments about the hiring freeze. As we know, President Trump’s 

hiring freeze did not exempt acquisition and logistics personnel. 

And I want to just drill down into how this hiring freeze affected 

staffing at the Medical Surgical Prime Vendor Program Office, and 

staffing in the Procurement and Logistics Office, and in key logistics and leadership positions at the facility and network level. 

What actions—I want to get into this—what actions have been 

taken to fill the 16 unfilled positions at the MSPV Office, Program 

Office? 

Mr. LEMMON. Well, many of the positions we have received exemptions where we can recruit those positions and are working to 

do that. At the network level in the field— 

Mr. TAKANO. How many of those positions have you received 

waivers to fill, waivers from the hiring freeze out of the 16? 

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15 

Mr. LEMMON. I would have to get back to you. 

Mr. TAKANO. So you don’t know that number, you will get back 

to us on that. Thank you. 

And how many of those positions have been filled of the 16? 

Mr. LEMMON. I would have to get with you with that number. 

Mr. TAKANO. Okay. And can you tell me, is there a timeline on 

when these positions will be filled, is there a goal? And how many 

of them would we intend to fill? Well, you don’t know how many 

have been exempted, so you really can’t answer that, right? 

Mr. LEMMON. I can’t answer it today. 

Mr. TAKANO. Okay. I want to clarify, did the hiring freeze adversely affect patient care, in this particular instance? 

Mr. LEMMON. You know, having an inefficient supply chain does 

impact logistics in the hospitals as far as their ability to order the 

products efficiently. Certainly, they do have ways to do purchases 

outside of the Med-Surge Prime Vendor, but I won’t say there has 

not been any negative impact to veteran care, because this does 

touch veterans’ care. 

Mr. TAKANO. So at the very least it could have significantly affected veterans, patient care of our veterans. 

Now, I want to expand upon, I mean, I appreciate Dr. Dunn’s 

question, I wish he hadn’t used the acronyms, because what I think 

he was asking is can you compare the VA’s Pharmacy Prime Vendor Program, I think he used the acronym, to its Medical Surgical 

Prime Vendor Program? So these two programs, one is the vaunted 

pharmacy program. And we know the VA has the ability to negotiate, unlike Medicare, I mean, this huge volume, the VA is able 

to negotiate with the pharmaceuticals, unlike other Government 

programs, right? 

So the question was, is there a comparison between the two, because we are obviously purchasing medical surgical supplies 

through also a similar situation? Can best practices from the pharmacy prime vendor program be applied to the MSPV Program? 

Mr. LEMMON. We believe they can, particularly in the area of 

program management and developing the requirements area. Pharmaceuticals are different in some respects than med-surge items, 

but there are certainly lessons that we can learn from our prime 

vendor program. 

Mr. TAKANO. Well, is the development of a medical surgical supply formulary potentially more complex, is it more complex than a 

pharmacy procurement? 

Mr. LEMMON. I believe that it is. 

Mr. TAKANO. Therefore, it would mean that we would have to 

have very good managers, very good personnel, and these are the 

vacancies that I am alluding to. If it is more complex, even more 

important to have people staffing the program. 

Mr. LEMMON. I agree with that. 

Mr. TAKANO. I am puzzled as to why it has not been a bigger priority, especially when we talk about surgical supplies and the timeliness of acquiring them, you know, impacting on when these surgeries can be scheduled. And it would seem to me that this is kind 

of an all-hands-on-deck emergency situation, that these positions 

should be filled and they should have been filled a long time ago. 

All right, that is all the questions I have, sir. I yield back. 

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16 

The CHAIRMAN. I thank the gentleman for yielding. 

General Bergman, you are recognized for 5 minutes. 

Mr. BERGMAN. Thank you, Mr. Chairman. 

I will get to the point very quickly and I will keep my questions 

short, you keep your answers short. How’s that? 

Mr. Lemmon, does a strategy document exist for developing the 

Med-Surge Prime Vendor Program? 

Mr. LEMMON. The— 

Mr. BERGMAN. Does the document exist? Do you have a strategy? 

Did somebody within the VA develop a strategic plan, with a mission statement and the strategy that follows? 

Mr. LEMMON. There were documents— 

Mr. BERGMAN. Is there a document that exists that you are working from today? Yes or no? 

Mr. LEMMON. Is there one document that lays out succinctly— 

Mr. BERGMAN. Is anybody in charge— 

Mr. LEMMON. Yes. 

Mr. BERGMAN [continued]. —of this over there? Who? 

Mr. LEMMON. We do have— 

Mr. BERGMAN. Who? 

Mr. LEMMON. We do have acting people in charge. 

Mr. BERGMAN. If you are acting, you are still in charge. 

Mr. LEMMON. Right. 

Mr. BERGMAN. Are you in charge? 

Mr. LEMMON. I am. 

Mr. BERGMAN. Okay. Does a document exist that you use on your 

desk, a reference when you are making sure those under your 

charge who you are leading and making progress in this programs, 

that there is a reference document that guides you in your decisions in your leadership role? 

Mr. LEMMON. We do have a supply chain transformation document that touches multiple areas, but if you are talking about 

MSPV— 

Mr. BERGMAN. We are talking about a specific program here that 

does not exist, because it hasn’t been developed. Is there a document? 

Mr. LEMMON. I am not going to say there is a specific document— 

Mr. BERGMAN. Okay. Well, I would suggest maybe you consider 

it if you are going to be successful in creating one. All right? 

Now, I am going to give you an example. By the way, in a former 

life before Congress—is this uncomfortable? It is, isn’t it? It is uncomfortable for me too. It is uncomfortable for all of us here, because there are a lot of veterans in the room who potentially could 

suffer the consequences of bad decisions at the administrative and 

deliverables level. Okay? We have great clinicians doing the job, we 

are not backing them up on the business side of it, not the clinical 

side. All right? So that is, if you sense a little edge on my part, 

your sense is correct. 

Let me just give you an example. Okay? Because a lot of things 

are near and dear to my heart, and I just a couple of weeks ago 

was up at Walter Reed for a, you know, procedure that gentlemen 

and ladies of my age are recommended to get. Okay? And it is a 

little uncomfortable at times. You know, in the medical business, 

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17 

we look for new products. I was in the medical products business 

for a long time and have dealt with the VA. But, for example, there 

is a product available that is used throughout the industry for 

colon-rectal screening, VA doesn’t use it. It makes things simpler. 

Can you give me an idea for new products, without guidelines 

driven by clinicians and validated through the industry through 

others that are already using the products outside the VA system, 

so any other hospital, have we created a barrier to introducing 

quality products that are going to allow our veterans to get better 

care? 

Mr. LEMMON. Well, we certainly have to have a more robust involvement with clinicians, so they can inform our decisions on what 

products would be on a formulary and available for ease of purchase in the hospitals. Certainly at the hospital level there are 

ways to procure items that any doctor may feel like they would like 

to have. 

So, you know, I wouldn’t say we have a barrier, but we can certainly— 

Mr. BERGMAN. Okay. Do you have a sense of urgency? 

Mr. LEMMON. We do. 

Mr. BERGMAN. When are we going to see it? 

Mr. LEMMON. We are developing a plan. 

Mr. BERGMAN. Is anybody in the hierarchy, the wire diagram— 

and I know my time is running out here—in the wire diagram who 

has been responsible for developing this new program, has anybody 

in that, again, wire diagram been paid a bonus? 

Mr. LEMMON. I don’t know. 

Mr. BERGMAN. I would like to find—I would like to know. 

Mr. Chairman, I yield back. 

The CHAIRMAN. I thank you the gentleman for yielding back. 

Ms. Kuster, you are recognized for 5 minutes. 

Ms. KUSTER. Thank you, Mr. Chairman. And thank you to our 

panel for being with us today. 

With my colleague General Bergman, who is the chair of the 

Oversight and Investigation Subcommittee, I am the Ranking 

Member, you can imagine that we take this role very seriously. I 

am sorry that you are the person in the hot seat today, but I do 

have to remind you that you are under oath and these questions 

are very serious for us. 

We are here to represent the balance of the well-being of our veterans and the well-being of our taxpayers, and we constantly are 

faced with this dilemma. But I have to say, joining the comments 

on both sides of the aisle from our colleagues, that we swung and 

missed in a big way on this project, because not only have we put 

veterans’ care at risk, which is our first and foremost goal, it 

sounds to me as though we have also cost the taxpayers. And you 

have talked about these purchase cards that are used. I know for 

a fact that that is not the most efficient, effective, or frugal way 

to go about making these decisions. 

So my concern—and you have had a lot of people ask you if veteran care was compromised—in my view, I want you to include 

when you come back with that answer to this Committee veteran 

care that was delayed was likely compromised, because treatment 

that is delayed is treatment that may be denied, and I think that 

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18 

is our concern. And you can tell it is not partisan, but this is simply unacceptable. 

And what I want to focus in on is the impact of the hiring freeze, 

because this may be the first time that this Committee has heard 

that veterans’ care is compromised, the quality of care, the timeliness of care, based on that hiring freeze. So could you just state 

for the record how the hiring freeze has affected staffing at the 

MSPV Program Office, staffing in the Procurement and Logistics 

Office, and in key logistics and leadership positions at the facility. 

And once, for the record, could you state has patient care been compromised due to a hiring freeze? 

Mr. LEMMON. Well, certainly over the past year there have been 

delays in hiring because of the freeze. Certainly we don’t have as 

an efficient of a supply chain as we need right now and not having 

key leadership positions or a more robust staff has impacted that. 

I do believe that hospitals have ways to get the products they 

need, we need to make it easier for them to get the products and 

assure taxpayers are getting good value when those— 

Ms. KUSTER. And would you agree—and I am sorry to interrupt, 

I want to hear the rest of your answer, but would you agree that 

using these purchase cards is not the most effective, efficient, and 

frugal way to go about making those purchases? 

Mr. LEMMON. I completely agree with that. It is really more of 

a last-resort approach. We need a very robust catalog of products 

that can be efficiently ordered by an ordering officer at a hospital 

and delivered through the prime vendor program for med-surge 

supplies. 

Ms. KUSTER. So, Mr. Lemmon, can I ask you, what is the next 

step for dealing with this hiring freeze? And I would like to work 

with our Committee chair, I am asking our Committee chair to 

work with the Trump administration, how are we going to guarantee that our veterans receive the highest quality of care in the 

timely manner that they deserve and how are we going to get 

around this hiring freeze to make sure that that gets accomplished? 

Mr. LEMMON. Well, we do have a process to request waivers, 

which we have done and we have received— 

Ms. KUSTER. Would it take legislation for you to—I mean, the 

waiver doesn’t seem to be an effective process here. I am trying to 

look at how we could make sure that this procurement is included—or excluded from the hiring freeze. This is important; this 

is the quality of care that our veterans receive and it is being compromised. Would that take legislation? 

Mr. LEMMON. I don’t believe so. I believe that those positions can 

be approved for hire. 

Ms. KUSTER. My time is up. I would direct that question to the 

chair, if I could, for a response going forward on how we get around 

this problem. 

Thank you. 

The CHAIRMAN. I will try to get that response to you by tomorrow. How’s that? 

Ms. KUSTER. Thank you, Mr. Chair. I yield back. 

The CHAIRMAN. I thank the gentlelady for yielding. 

Mr. Banks, you are recognized. 

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19 

Mr. BANKS. Thank you, Mr. Chairman. 

Ms. Oakley, the GAO report mentions a, quote, ‘‘lack of leadership stability,’’ end quote, at the VHA program office, but no mention of what actual qualifications VHA leaders need to possess in 

order to be able to effectively lead a medical surgical program office. So what is your vision on the qualifications and experience for 

the MSPV director that was recommended in the report? 

Ms. OAKLEY. I think you need someone that has both clinical experience as well as acquisition and procurement experience. 

One of the things that we found during the course of our review 

is, you know, this effort requires collaboration across a number of 

different types of offices—procurement, logistics, clinicians—and 

they all speak different languages. So getting somebody in there 

that has experience on both sides that would be able to bridge that 

gap and translate, would be an ideal person to put in place. But 

frankly, at the very minimum, getting somebody in there for the 

long term. Getting somebody who is going to be there and be able 

to establish relationships all across VA to be able to implement this 

big change is what should be the priority. 

Mr. BANKS. Okay, that is very helpful. 

Now, Mr. Lemmon, now that I gave you a break, back to you for 

a moment. It was brought to our attention at a recent roundtable 

that you participated in that the Department was in the final 

stages of determining a, quote, ‘‘way forward,’’ as you called it, to 

address the backlog by implementing business process reforms in 

Section 8123 of Title 38 through administrative means via a rulemaking. 

Can you provide us with a more specific update of the status of 

this effort and a better understanding why the potential exists for 

a rulemaking? It would seem that you already have the authority 

for this and it would likely be better if this was done administratively. 

So what is the timing for such a decision and when do you think 

it would be implemented if we have to do it administratively? If it 

has to be done via a rulemaking, as you said, what authority do 

you need from the Committee to do that? 

Mr. LEMMON. Okay. The question you posed is in regards to prosthetic implants, which is covered by the special authority VA has 

under 8123. A business process has been drafted, it is being circulated amongst the Department for concurrence. At that time, 

once that is finalized, our Office of General Counsel will determine 

whether we can implement administratively or go through rulemaking. And that decision has not been made yet, but we anticipate that that will happen quickly, probably within the next 30 to 

60 days we will have a decision on that. 

Mr. BANKS. Okay. We will follow up with you in the next 30 to 

60 days. 

On another note, how is the new process for purchasing the surgical implants different from the existing prosthetics and sensory 

aids services process? 

Mr. LEMMON. Well, the proposed process really, essentially relies 

on having a national contracts where we have leveraged our spend, 

but the contracts are with the major suppliers. The portion where 

we have to depend on the authority in 8123 is really the timing of 

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20 

the orders, because a physician would actually choose exactly what 

they are going to use in the surgery, we would issue those orders 

after the products are consumed, and that is where we need the 

authority that is outside of the FAR. 

Mr. BANKS. Okay. Thank you. 

Ms. Oakley, since I have a minute left, the GAO report stated 

that the recent reforms did not meet the needs of medical centers 

and as the end user in caring for the patient. It would seem that 

for the arrows in determining the formulary items are more likely 

not points up from the clinical needs perspective and instead down 

to the physician or surgeon, do you see any of this—if that makes 

sense—do you see any of this changing in the 2.0 effort? 

Ms. OAKLEY. I think that VA has come to the recognition that 

having a clinically-driven program is vital to success. I think it was 

a late recognition and I think that they are, at least on paper and 

what I have seen, indicating that this would be the way forward. 

And so I find that as a positive development; again, though, it all 

comes back to execution. 

Mr. BANKS. Okay. Thank you. My time has expired. 

The CHAIRMAN. I thank the gentleman for yielding. 

Mr. Coffman, you are recognized. 

Mr. COFFMAN. Thank you, Mr. Chairman. 

First of all, Mr. Lemmon, can you tell me, Ms. Stella Fiotes, 

what position does she have right now? 

Mr. LEMMON. I believe that she is the Acting Chief Acquisition 

Officer after Greg Giddens retired. 

Mr. COFFMAN. So she is in charge right now, temporarily, until 

a decision can be made. That is interesting, because she was in 

charge, she was one of those in charge of the—she was the Office 

of Construction Projects, Office of—and so under the Office of Acquisition Logistics and Construction. And so we had a project in 

the State of Colorado that she was in a leadership on that was supposed to cost $600 million, a little over $600 million, it cost 1.67 

billion, is where we are right now, because it was so badly mismanaged, and yet she has been promoted in terms of the hierarchy 

at the VA. And so you can guess why there is not a change. This 

Administration made so many promises about how they were going 

to clean up the VA, but if they are keeping people like this around, 

they are obviously not that interested in cleaning up the VA. 

So one of the problems that we had before when we had a briefing, I think it was probably a couple years ago, on procurement, 

a year or 2 years ago—last September, was that they were—and, 

Ms. Oakley, maybe this is to you—they were taking the purchase 

cards to get around the contracting process and just adding them 

all up. So just to—but part of the problem was is that patient safety was compromised, because they were able to get around all the 

procurement rules and with some of those regarding patient safety, 

particularly in the purchase of tissues and things like that, human 

tissues. 

And so could you comment on that? 

Ms. OAKLEY. I can’t directly comment on patient safety, but I 

would say that purchase cards were definitely seen as the way to 

meet the needs of the medical centers because of the limited formulary and the formulary that didn’t meet their needs. And so VA 

leonard.horne on VACREP0180 with DISTILLER

21 

has seen an increase in purchase card purchases, you know, during 

the course of the past year with the rollout of MSPV–NG. 

Mr. COFFMAN. Okay. Anybody else? Mr. Lemmon? 

Mr. LEMMON. Certainly the greater use of purchase cards has not 

been good for VHA. 

Mr. COFFMAN. Well, how can you—I mean, so we have known 

this problem for so long, we have identified it, and identified it that 

people are using it to get around procurement rules, get around 

contracting rules, because that is much more involved and, you 

know, they want to take a shortcut. And that is not good for the 

taxpayers and that is not good for the VA patients, but yet you continue to do it, I mean, your organization continues to do that. Can 

you tell me why? 

Mr. LEMMON. Well, the reason they are doing it at the field is 

because we haven’t provided a robust enough prime vendor program for med-surge supplies to meet their needs, quite frankly, and 

that is what has to be corrected to reduce the purchase card spend. 

Mr. COFFMAN. Okay. Well, I can say I am very disappointed, I 

don’t see changes from the last Administration to this Administration in the VA and that is very disappointing. 

I yield back. 

The CHAIRMAN. Dr. Wenstrup, you are recognized for 5 minutes. 

Mr. WENSTRUP. Thank you, Dr. Roe. 

Mr. Lemmon, who is the MSPV Program leader at this time? 

Mr. LEMMON. Currently, we have Dan Harris, and he is supported by John Miller in our office. 

Mr. WENSTRUP. Can I ask what their qualifications are? Do they 

have any clinical background, you know, RN, MD, where they fit 

in that? 

Mr. LEMMON. They have logistics background, they are not doctors or nurses. 

Mr. WENSTRUP. So who at VHA is the clinical leader overall? 

Mr. LEMMON. My boss is Tammy Czarnecki and she is certainly 

involved in the program, Assistant Deputy Under Secretary for 

Health, for Operations and Management, and she has a nursing 

background. 

Mr. WENSTRUP. Okay. VHA has said they plan to utilize about 

130 clinical program offices to provide clinical input going forward, 

which makes sense. Can you tell me how this will work and give 

me some specifics? 

Mr. LEMMON. We have developed a very structured, clinicallydriven sourcing program that is being routed for concurrence at 

this juncture, but it does involve the program leaders and clinical 

leaders, and they would identify those clinicians in the field and actually take responsibility for the product areas that falls under 

their responsibility. 

It is recognized, I think, across VHA how important having a 

very robust and in-depth clinical program is to support our medsurge program, and that is what we are trying to build. 

One of the weaknesses or failures in our prior attempt at this is 

that we didn’t have the structure behind it that we needed. So it 

was always a challenge to the clinicians and get the input. And it 

has been recognized within the Department that to fix this, we 

have to have a very structured, clinically-driven sourcing program 

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where these department heads fully understand their responsibilities and obtain the services of the clinical experts in the field to 

bring to bear to the decisions on our formulary. 

Mr. WENSTRUP. Yeah, I am just curious how far down the line 

you go. If you have one person who is in a certain field and maybe 

they have some input, that may be fine. 

And I can tell you how big the VA is, but I can tell you at every 

hospital I worked, every year, every hearing when it comes to 

budgeting and planning and everything else, every individual surgeon would get asked, is there anything that you need? Is there 

something now out there that you need to do your job better? 

How far down do you take this? I know Ms. Oakley talked about 

execution, right? How are we executing his? 

And this pertains a lot to the retention of those that we are trying to recruit, because if you come in and you want to take care 

of veterans, but your hands are tied because you can’t get the 

things you need to take care of them the best way that you know 

how, and they say, well, that is the system or we can’t do that, 

guess what? You leave, because your name is on the line. And that 

doesn’t mean you get everything you want whenever you ask for it, 

you know, but you have to have a process all the way down to each 

and every individual, in my opinion. 

So I would like some comment on that, and maybe some advice 

from Ms. Oakley as well. 

Mr. LEMMON. Well, I completely agree with you, and that is why 

at the hospitals we have clinical product review committees that 

can actually push requirements up, in addition to trying to establish this clinically-driven source of— 

Mr. WENSTRUP. So that is at a committee level, but I am asking, 

are you getting down to the nitty-gritty to those that are actually 

doing the work, currently? 

Mr. LEMMON. We definitely need to do a better job of that— 

Mr. WENSTRUP. Thank you. 

Mr. LEMMON [continued]. —there is no question. 

Mr. WENSTRUP. Ms. Oakley? 

Ms. OAKLEY. That was one of the things that we found in our review is that VA didn’t really outline a process for how to get something onto the formulary that would meet the needs of a physicianidentified need. And so one of the things we recommended, because 

the formulary is a living, breathing thing, right, I mean, it is going 

to be changing all the time, is laying out how does one, how does 

one working-level physician go about getting something on the formulary, so that they can actually have the things that they need 

in their day-to-day life. 

And so that is right in line with one of our recommendations in 

saying that they should lay out this process and communicate it 

through all levels of VA. 

Mr. WENSTRUP. Thank you. 

I yield back. 

The CHAIRMAN. I thank the gentleman for yielding. 

Mr. Poliquin, you are recognized. 

Mr. POLIQUIN. Thank you, Mr. Chairman, very much. I appreciate it. 

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I am a little taken aback here, to be very blunt with you, so let 

me just get right to it. You folks over at the VA have about 170 

veteran’s medical centers around the country, right? Is that right, 

Mr. Lemmon? Okay, about 170. About 40,000 doctors, practitioners, 

and 170 medical centers around the country. And you are taking 

care of about 7 million of our veterans, our veterans who stood up 

for this country and fought for our country and gave us our freedom, is that right? Okay. 

Now, you would think with that kind of horsepower you folks 

would be able to get your act together, use the volume that you 

folks represent, and go out to these different folks that manufacture catheters and stethoscopes and scalpels and buy this stuff in 

volume, such that the folks up at Togus, Maine, when they need 

to operate on one of our heroes, they will have the stuff that they 

need. And now we are hearing from Mr. Bergman a minute ago, 

you said you don’t even have a plan to execute this process. 

Number two, I just heard a minute ago that because you folks 

are unable to get the equipment that we need in our operating 

rooms or what have you, you folks are using credit cards or some 

sort of Government credit card to get what you need before they 

go in the OR and take care of one of our veterans. 

And you know what I think? I think you have had 12 years to 

do this. The last time I asked my staffer, she said, yeah, this process started in 1995. This is 2017 on December 7, Pearl Harbor Day, 

it is almost 2018. This is the third time you guys have tried to do 

this. 

I don’t know. Neal and I are new here, along with Jodey and 

Clay, and Jim and Jim—and Jack and Jim. I will tell you, if I am 

here 12 years from now, I don’t want to hear you folks come in and 

say, well, this is our sixth time trying this, we can’t quite get it 

right. I don’t think you guys are competent. 

You have 340,000, 345,000 employees, your budget has gone from 

120 billion a year to 190 billion a year over eight years. You have 

got plenty of dough, plenty of people, and you are saying you can’t 

find the people to run this. Give me one day, I will go over there, 

I will find you someone to run this. 

So I don’t want to be around for the next few years having you 

folks come back in saying, well, we couldn’t quite get it right. 

Mrs. Oakley, you are involved in the part of the Government that 

is supposed to oversee these folks and analyze if they can do it, 

right? Okay. Have you ever heard of this outfit over at the DoD 

called the Defense Logistics Agency? 

Ms. OAKLEY. I have. 

Mr. POLIQUIN. Okay, good. And they have a similar process, 

right? They are trying to do what you guys are trying to do, which 

is to buy in bulk to make sure the folks that are providing health 

care for our heroes can do it cheaply and save the taxpayers 

money, right? How are they doing? 

Ms. OAKLEY. As far as I know, the DLA has a fairly successful 

program. 

Mr. POLIQUIN. Good. How are we doing over at the VA? Poorly, 

right? 

Ms. OAKLEY. Yes. 

Mr. POLIQUIN. Good. I am trying to save you some breath here. 

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Have you saved any money, Mr. Lemmon, over the last 12 years 

trying to do this? Have you saved any money? 

Mr. LEMMON. Well, we have saved— 

Mr. POLIQUIN. How much have you saved? 

Mr. LEMMON. Under the supply chain initiatives, it was approxi- mately $300 million. 

Mr. POLIQUIN. What percent have you saved? 

Mr. LEMMON. What— 

Mr. POLIQUIN. What percent have you saved? You are buying a 

scalpel, you are buying a thousand of them instead of two of them 

on a credit card, you would think you would be able to save a little 

bit of money. 

Mr. LEMMON. You would. I don’t know what the— 

Mr. POLIQUIN. Okay, fine. 

For the record, I have a couple questions for Mr. Lemmon. Number one, you talk about distribution-of-pricing agreements. They 

are different from contracts, right? 

Mr. LEMMON. They are. 

Mr. POLIQUIN. Are the prices binding in a distribution-of-pricing 

agreement? Yes or no? 

Mr. LEMMON. I don’t believe they are. 

Mr. POLIQUIN. Okay, so that is a no? 

Mr. LEMMON. No. 

Mr. POLIQUIN. That is a no. Okay, thank you, Mr. Lemmon. Is 

there any competition when you are dealing with a distribution-ofpricing agreement? 

Mr. LEMMON. Not normally. 

Mr. POLIQUIN. Oh, okay. So it is sole source, right? Okay. 

Let’s see. How about any conflicts of interest? Ms. Oakley, have 

you seen any potential conflicts of interest? These folks have been 

trying to do this for 12 years, now they have the third try, they 

are coming back to us, they are trying to do this? Any potential 

conflicts of interest in what they are trying to do, which I have no 

confidence they are going to be able to do? 

Ms. OAKLEY. I didn’t see any apparent conflicts of interest in our 

work. 

Mr. POLIQUIN. Good. 

Mr. Chairman, I have 30 seconds, I have to do this, but I am 

going to yield back the 30 seconds, so I can give Mr. Lemmon break 

here. 

[Laughter.] 

Mr. POLIQUIN. Thank you. 

The CHAIRMAN. I may have the big one here that Mr. Poliquin 

yielded back some time, that is amazing. Thank you, sir. 

Mr. Arrington, you are recognized. 

Mr. ARRINGTON. Thank you, Mr. Chairman. 

I don’t think there is enough outrage on this Committee, quite 

frankly, with what we hear day in and day out. The last Oversight 

Committee that I sat under the leadership of Chairman Bergman 

was about a GAO report that basically said that the VHA is not 

investigating bad doctors, they are not disciplining bad doctors, and 

they are not reporting bad doctors to a database, so that those bad 

doctors can’t continue to practice in the VHA and in other places, 

and it was just astonishing. And so I want to associate myself with 

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the indignation of Ranking Member Walz and of my colleague 

Bruce Poliquin. 

I don’t even know where to begin. I think I would first say for 

the record, thank God our veterans have a choice now. And we 

can’t do enough, Mr. Chairman, to give them more choice and flexibility to get out of this broken Government-run, single-payor health 

care system that they are trapped in, and it is shameful that we 

do that. And so we need to do everything we can to continue to enhance that Choice Program. 

Ms. Oakley, I appreciate your clarity and your definitiveness in 

your answers. You seem very confident, so I am going to start with 

you. And I appreciate that; that is sincere. 

You said there is an execution problem; that the model is a good 

model, but that we are not executing. Is that because there is not 

enough staff, there is not the right staff, there is not continuity in 

staff? Is it leadership? Is it poor planning? Break that down for me, 

if you would. 

Ms. OAKLEY. Okay. Well, the short answer is, it is all of the 

above. 

Mr. ARRINGTON. Okay. 

Ms. OAKLEY. I think any— 

Mr. ARRINGTON. Rank order the top two or three for me. 

Ms. OAKLEY. Well, if you look at organizational transformationleading practices, the bottom line is it all starts with solid leadership and tone from the top. 

Mr. ARRINGTON. Can I stop you just right there? Because it is my 

understanding we invited some of the medical leadership from the 

VHA to come and testify today; are you aware of that? 

Ms. OAKLEY. I am not. 

Mr. ARRINGTON. Mr. Lemmon, are you aware of that? 

Mr. LEMMON. I heard that earlier today. 

Mr. ARRINGTON. Yeah, we asked your bosses to come and they 

decided to send you all. And it tells me that there is a leadership 

problem; they ought to be here. I can’t think of anything more important to veteran patient care than what you are doing and they 

refused to come. I don’t know the reason, maybe there is a good 

reason. 

So, leadership, tell me the chain of command. Give me the three 

or four layers up. Start with the top and work your way to yourself. 

Ms. OAKLEY. It is actually complicated within VA, right? 

Mr. ARRINGTON. Well, there is problem number one. 

Ms. OAKLEY. Yeah, which we have reported on before, within the 

organization. And so, you know, the Chief Acquisition Officer is a 

key role in all of this. It is the person that is advising the Secretary 

of VA on how to accomplish VA’s mission through its acquisition 

management function, and it has been somebody in an acting position and has turned over multiple times since at least 2009. 

Mr. ARRINGTON. So I have heard a lot about hiring freezes from 

my colleagues today. Were there vacancy problems before the hiring freeze? 

Ms. OAKLEY. There were. 

Mr. ARRINGTON. So the continuity in leadership existed or 

preexisted— 

Ms. OAKLEY. Yes. 

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Mr. ARRINGTON [continued]. —this hiring freeze? 

Ms. OAKLEY. Yeah, absolutely. 

Mr. ARRINGTON. And by the way, I am for hiring freezes, I am 

for cutting this Government, I think you could cut a third of it and 

we could continue to provide—it is about cutting the right parts of 

it, and being smart and strategic about it. 

And I am willing to work with the Ranking Member and anyone 

else to send a letter to the leadership, whether it is the Secretary 

or if it is Ms. Clancy or Czarnecki, and express our serious concern 

that they aren’t here at this hearing to explain why this program 

is not working for our veterans, and to tell them that they need to 

get in gear in hiring people and getting their operation fully functioning. 

Ms. OAKLEY. Absolutely. 

Mr. ARRINGTON. But that is something that I would be willing to 

do, Mr. Ranking Member, and anyone else. But, again, this seems 

to pre—this continuity or lack thereof seems to preexist this hiring 

freeze— 

Ms. OAKLEY. Absolutely. 

Mr. ARRINGTON [continued]. —is that accurate? 

Ms. OAKLEY. Yeah, and at all levels, from the CAO on down to 

key logistics positions within the medical centers. They are not 

easy positions to fill. So it is not necessarily, you know, that you 

would be able to hire somebody off the street. And competition from 

private hospitals, as I understand it, is pretty fierce for skilled, experienced logistics individuals, as well as the acquisition workforce 

related to contracting skills. 

So these kind of vacancies and lack of skill sets are pervasive 

throughout VA and also other agencies. 

Mr. ARRINGTON. Thank you, Ms. Oakley. My time has expired. 

I yield back. 

The CHAIRMAN. I thank the gentleman for yielding. 

Mr. Peters, you are recognized for 5 minutes. 

Mr. PETERS. Thank you, Mr. Chairman. As you know, we cohosted a roundtable with Mr. Banks, which brought together the 

VA and stakeholders from the medical device community who could 

participate in the program to discuss what is occurring and what 

we could do to make it better, and I appreciate the Chairman having the hearing today. 

We also had the GAO and Coalition for Government Procurement 

in attendance, we also had the Chairman, and I am very interested 

in continuing to work to improve this program. 

At this time, though, I have not been able to attend most of the 

hearings. I am going to yield my time, remaining time to the Ranking Member, Mr. Walz. 

Mr. WALZ. Thank you, Mr. Peters. 

And I would just like to say—and I appreciate the gentleman’s 

willingness to work together on this—I would like to say, though, 

using a fully-functional VA is a choice, it is a choice that 94 percent 

of VFW members who were surveyed would like to make. So as I 

said in my opening statements, should I be a conspiracy theorist 

on this, continuing to undermine the VA’s capacity to do what it 

is going to do under the guise of then you will have to go to the 

private sector is not providing a full range of choices. Those of us 

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who use VA services and find it quite adequate are very frustrated 

when the reason we are not getting that care is, is because we 

haven’t filled the positions. 

And I don’t disagree that may have extended before, but I want 

to be very clear, under oath, a VA person said the hiring freeze has 

precluded us from filling these positions and it has adversely affected veterans’ care. That should sink in to all of us that we do 

have a responsibility to get that together, we do have a responsibility to find this. 

And I would like to say, Mr. Lemmon, I think the questions were 

right about asking other folks to attend here, because the buck 

does stop somewhere. And again, for years I heard it, it stops with 

the President and it stops with the Secretary. 

I want to be thankful for you, your honesty and candor, and I 

also want to make it clear in a public setting, should there be any 

retaliation for stating factually what you see, that will pay with a 

heavy price in this Committee. This idea of making sure VA employees are able to come up here, speak candidly about what is 

going to improve our veterans’ care, I am appreciative of that. I 

know you are taking a lot of this, it is systemwide. GAO is here 

to help us do that. There are certainly things out there. 

There aren’t necessarily, as we heard, if you send this over to the 

private sector, who is going to do it? Who can do it? 

And as the Chairman and I were talking about here, the Defense 

Logistics Agency might not be the best example of how everything 

is supposed to work, and the F–35 certainly comes to mind and 

other things, that these are complex issues trying to get care. But 

if we are looking for the easy fix or we are looking to pass the buck 

on this, that is simply unacceptable. 

I am with—the Chairman said it right, we are not trying to 

launch Voyager III here, we are trying to order surgical supplies 

that they had, the suggestion is made and this is why this Committee is so strong. These physicians speak with experience, they 

speak with let them into that. GAO put out a chart we have been 

up here referencing and looking at that said follow this and you 

will get this right. 

And so I thank the gentleman for yielding his time. I want to be 

clear that I am a supporter of Choice, I was there when Choice was 

created, I was part of that, as was Mr. Takano and Mr. Roe, but 

part of the Choice is a fully functional. And again, if it is hyperbole 

that it is a Government—no, it is our responsibility. And we have 

said this, you give them that card and tell them go somewhere, 

what hearing are we going to have with hospital executives from 

the private sector who get to do it the way they want to? These are 

the only people that we can capture, bring in here, swear under 

oath, and get some results. 

This should not be that difficult. This is not the fight of privatization, Choice, community-based care or whatever, this is basic logistics of functioning of a medical institution that is being accomplished. I represent the Mayo Clinic, they have to order a lot of 

supplies for their institutions and they are able to do that. 

So I have full confidence we can do this. We just need to again— 

now I have come full circle and been back here from that 11 years 

ago starting and I have been convinced of this, almost every single 

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problem can be fixed by proper leadership, by accountability and 

what is there, and this is no different. 

I yield back. 

The CHAIRMAN. I thank the gentleman for yielding. 

There are many private sector systems, HCA comes to mind. It 

is a large system, about the size of VA as far as number of hospitals, and they don’t have these problems. 

Mr. Higgins, you are recognized for five minutes. 

Mr. HIGGINS. Thank you, Mr. Chairman. 

Mr. Chairman, Mr. Ranking Member, this hearing is reflective of 

exactly the type of exasperation that we the people, we just don’t 

get it, so we shake our head. Any attempted savings for money 

from bulk purchasing is certainly wasted on bureaucracy. I don’t 

have confidence in this entire MSPV system. 

VA operates I believe 1233 medical facilities, including hospitals 

and CBOCs, we are spending a billion dollars a year, that would 

be about 4 million per facility. There are distinguished doctors and 

surgeons on this panel. I have certainly had my surgeries based 

upon traumatic injury, including my entire right eye socket to be 

reassembled, but I just presumed that the surgeons and doctors 

and surgical staff had the tools and the facilities that they needed 

in order to perform that surgery. And I would expect that we can 

do a better job by allowing the money to follow the veteran. 

I think that the money we are spending on this program is wasted. We already have oversight over the command and control and 

chain of command over every VA facility and the directors thereof. 

I think the doctors and surgeons and medical professionals that 

work within the VA and the VHA should be able to order what 

they feel they need. 

And I think that the Members of this panel that are testifying 

today are quite courageous to have appeared, you know, because it 

is virtually indefensible the waste of the people’s treasure to accomplish nothing. 

I represent the LAC group in Louisiana. They operate in 26 

states, they have 13,000 employees and 60 hospitals. They don’t 

have this problem, but they don’t have the bureaucracy that we 

deal with in this town. 

With the Chairman’s permission, I would like to yield my remaining time to my friend and colleague Dr. Dunn, an accomplished surgeon. 

The CHAIRMAN. Two minutes, Dr. Dunn. 

Mr. DUNN. Thank you very much, Mr. Chairman. Thank you, 

Congressman Higgins. 

I am a bit of a supply site kind of guy, I want to turn to the suppliers. There is a great sense of dissatisfaction among the suppliers 

to this program and I want to ask Mr. Waldron if you would characterize that dissatisfaction briefly. 

Mr. WALDRON. Our members have been frustrated with the rollout of the Prime Vendor Next Generation. We have seen, you know, 

RFPs and solicitations that have not accurately described products 

that to be acquired— 

Mr. DUNN. We have information that some of them are actually 

considering just not dealing with the VA, it is just not worth their 

trouble; is that accurate? 

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Mr. WALDRON. I think there is bid fatigue out there right now, 

because we have had a cycle, so to speak, where solicitations were 

put out, then they were cancelled, now the VA is attempting to put 

them back out again. And all this bid-and-proposal costs are part 

of the business when you are dealing with the Government and 

those funds are not unlimited for a private entity. 

Mr. DUNN. That is right. So these are businesses, I just want to 

underscore this for everybody, these are businesses that literally 

exist to make and sell products, and the VA is making it so painful 

to do business with them that they will walk away from the business. That really is just a huge statement against the process that 

they are faced with. 

One more question I want to bring up, because this one also is 

a little frightening from a clinician’s point of view, and that is the 

gray market items that we see. These are really dangerous for patients, because a lot of the things that we use have to be handled 

very carefully, very sterile, and I see that the gray market has 

somehow entered into the VA purchasing system. Can anybody 

make sense out of that for me? Tell me how that happens or that 

it won’t happen anymore? Give me some comfort. Gray market 

items being bought by our Government. 

Mr. Lemmon? 

Mr. LEMMON. I have heard of a few examples of that. I don’t 

think we generally have that problem on any scale, but, again, I 

think it goes back to our supply chain system. When we don’t have 

the breadth of products we should have available that is on national contract with reputable manufacturers and— 

Mr. DUNN. My time has expired, but I would like you to assure 

us, in fact I am going to ask you to get back to our Committee, 

send something back that says what are you doing to address this 

problem so that it doesn’t continue to be a problem. 

Thank you very much, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman for yielding. 

And I thank the witnesses today for being here and sharing your 

testimony. I know this has been a difficult hearing today. 

And I will see if Mr. Walz has any closing comments. 

Mr. WALZ. Thank you, Mr. Chairman. 

Thank you all for being here and helping. And in lieu of a closing 

statement, I would like to yield 30 seconds to Mr. Takano. 

Mr. TAKANO. Thank you, Ranking Member Walz. 

I just want to make sure that we don’t rush to a conclusion or 

make a wrong conclusion from today’s testimony that the answer 

is to put everyone into the private sector or that the Choice program is somehow going to alleviate what is going on here. What 

I heard today is we have a lot of unfilled positions, and those positions have been vacant and possibly attributed to an unwise hiring 

freeze. 

Second, I was also at that Oversight hearing and my line of questioning focused on whether or not private sector health organizations were just as guilty or just as lax in terms of their reporting 

about practitioners, and the questioners were either unable to answer that question or were actually saying that they probably 

weren’t any better than the VA. 

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So the answer is not necessarily that the private sector health 

medicine is a panacea or an answer to the challenges we have at 

the VA. And I would say that we have to do our best to make sure 

that the positions we have at the VA are filled, that we staff the 

40, the 45,000 unfilled positions in the health arena here at the 

VA, that these are some of the things that we need to focus on just 

as much, rather than rush to the conclusion that people are 

trapped, so-called trapped in this system, rather than making the 

VA the very best VA that it can be. 

The CHAIRMAN. I thank the gentleman for yielding. 

I will point out that in my 9 years finishing up this month on 

the VA, I looked at the first budget that I showed up on in 2009, 

it was 93.5 billion and about 250,000 employees, and now VA has 

a budget that we are trying to work to, it is $186.5 billion. And I 

do want to point out to people that because of the Budget Control 

Act in 2011, essentially, until we changed the caps this year, those 

numbers were almost level. 

So we got that money from the military, from education, from 

other programs and put it in the VA, because this Congress, both 

Republicans and Democrats, felt that was important. And I think 

when it is not being spent wisely, it is frustrating to us here and 

to those other people that we took the money from. Basically, that 

is what we did. 

And just to make it very clear, it is not a money problem. It is 

not a hiring freeze that is doing this, I can tell you right now it 

is not. It is leadership and that is absolutely what it is. 

And so when you good leaders in places—I got a letter that I 

wish I had time to read on here, from a veteran in Albuquerque, 

New Mexico that six years ago wouldn’t go to the VA there, and 

he walked through every bit of his visit and then he wrote me a 

letter—I called the guy yesterday—he wrote me a letter about how 

much better it is. So he walked me through his next visit, which 

was absolutely a great visit to the health care. 

So things are not all doom and gloom. I want to make sure that 

is out there. There’s a lot of good things going on at the VA. Right 

now this is not one of them, though, I will have to say. And it has 

got to get corrected. 

Because, Mr. Takano, in my career I don’t remember having to 

go out and walk and tell a patient’s family I don’t have the equipment and tools to do the operation on your wife today, that never 

happened. I have worked in VA hospitals, I have worked in private 

not-for-profit hospitals, I have worked in for-profits, I worked the 

whole gamut, it has never happened to me before, but it is happening in VA because of this procurement problem. 

And, as Ms. Kuster said, this ultimately will affect quality of 

care. Putting the hernia off for a day or a week, that doesn’t matter. Putting a bypass off or a stent or something that really matters, or a cancer operation might really matter. 

And I know our witnesses today, many of you in the audience 

also, none of the MSPV trials and travails are just not news to you, 

but you work with the program every day. And I get the impression 

that when many of the decisions that we have discussed were made 

causing problems that we are still grappling with today, some of 

you probably felt that they were questionable. For example, setting 

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a 6,000-item formulary when the industry standard is 30 to 50,000 

items, trying to establish the formulary all at once in a little more 

than a year, initially. They are not insisting on clinical leadership 

involvement or deliberately sidelining them. You are professionals 

and I believe these decisions must have made you uneasy. 

I ask that you use this GAO report and this hearing as a catalyst 

to take a hard look at the situation and decide what really makes 

sense. What kind of MSPV Program, whatever you want to call it, 

I don’t care, are you truly prepared to live with for years in the future. This is critically important to providing quality health care 

for people. What is best for our veterans? 

Unfortunately, it seems the desire to gloss over difficulties and 

declare victory and move on may have contributed to MSPV’s problems in the past. If it takes longer to get it right, so be it, get it 

right. 

I appreciate your participation today and 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. 

I do before I finish want to thank the Committee, both sides of 

the aisle, for a very, very productive year from this Committee and 

what we have accomplished for our Nation’s veterans, many times 

we don’t—the Accountability and Whistleblower Act, the Choice Act 

we have done, the Forever GI Bill, the claims appeal, and we are 

going to continue. This Committee is going to continue to work to 

try to get things right and provide, as Mr. Takano said, the best 

quality care for our Nation’s heroes. 

And I again want to wish everyone here in the audience and on 

this Committee a very, very merry Christmas with your family, 

and a happy holiday season for all of you. 

Mr. TAKANO. Mr. Chairman, as a point of personal privilege, I 

just want to acknowledge that our colleague Ms. Brownley is not 

with us today because she is in her home district because of the 

fires in California. And I appreciate your holiday wishes and I take 

them to heart, and I too enjoyed this year of productivity. 

The CHAIRMAN. Thank you all very much. And with nothing further, the meeting is adjourned. 

[Whereupon, at 11:39 a.m., the Committee was adjourned.] 

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A P P E N D I X 

Prepared Statement of Ricky L. Lemmon 

Good morning Chairman Roe, Ranking Member Walz and Members of the Committee. Thank you for the opportunity to discuss VA’s Medical/Surgical Prime Vendor (MSPV) program and the related Government Accountability Office (GAO) draft 

report. I am accompanied by Mr. Philip Christy, Associate Executive Director, Strategic Acquisition Center. 

Introduction and History of MSPV 

VA is committed to providing our Veterans the best care available while being 

good stewards of taxpayers’ dollars. Part of meeting these commitments is making 

sure that our medical centers have the right supplies and equipment to deliver the 

care our Veterans need. 

The Department once relied on its own procurement, storage and transportation 

system to distribute relatively low cost and frequently demanded medical and surgical supplies until the mid-1990s. VA then did away with this in-house system and 

converted to a commercially sourced MSPV program to provide this capability. Since 

then, the MSPV program has been the primary method used to provide our medical 

centers these kinds of supplies. 

The primary source of supplies for previous generations of MSPV contracts was 

the Federal Supply Schedule (FSS). Use of FSS, when combined with local and regional contracts, resulted in our hospitals having access to a clinically viable selection of supplies. However, this operational model did not facilitate clinical product 

decisions on a national level that would allow VHA to leverage its purchasing 

power. 

Adoption of clinically driven strategic sourcing was, and continues to be, envisioned to leverage VA enterprise-wide purchase volume in order to drive lower 

prices and improve product quality. The MSPV–Next Generation (MSPV–NG) contract was conceived, in part, to address these issues through the development and 

use of a mandated national catalog or formulary. 

Current Medical/Surgical Prime Vendor 

In 2016, the Office of Acquisition Operations, Strategic Acquisition Center, in 

partnership with VHA, announced the award of four Indefinite Delivery Indefinite 

Quantity (IDIQ) contracts in support of MSPV–NG. The program was mandatory for 

all VA medical centers. Medical centers pay prime vendors a distribution fee plus 

the product price. Product prices were primarily established by negotiated blanket 

purchase agreements against FSS contracts, VA national indefinite delivery contracts, and local contracts to support Veterans Integrated Service Networks. The 

distribution fee was a markup to the product prices intended to cover prime vendor 

costs for managing customer inventories and ensuring the timely delivery of needed 

products to customers. As documented in the GAO report, this contract has not been 

as successful as we would have liked, due to the time required to solicit and award 

enough medical and surgical products to meet the needs of our medical centers. Accordingly, VHA has decided to move forward with modifying the current contracts 

or developing replacement contracts to rectify the issues identified in the GAO 

audit. In determining how to potentially improve the availability of items under the 

current MSPV contract, we are considering the contracting process used by the Defense Logistics Agency (DLA) to efficiently establish pricing agreements that enable 

over 100,000 medical and surgical items to be available through DLA’s MSPV contract. 

An acquisition plan has not been finalized for replacement of MSPV. VA is exploring a different approach to MSPV, where potential prime vendors can propose a full 

catalog of medical and surgical products. This would depart from the current approach to MSPV where individual contracts are negotiated with each supplier to 

form a book of contracts that MSPVs can distribute against. The potential benefits 

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of MSPV 2.0 would be a more robust catalog of items than we have today that could 

be available from the beginning of the contract and lower prices. VA is conducting 

market research to identify the best commercial solutions to meet its mission needs 

in this area. Additionally, the administrative resources and time required to negotiate thousands of individual contracts would be reduced if VA only negotiated with 

the prime vendors for both medical and surgical products and distribution services. 

There have been multiple meetings with industry leaders to obtain feedback regarding the proposed approach to MSPV 2.0 and that feedback is currently being considered. Feedback will also be obtained from VA clinicians before VA makes any final 

decisions regarding a new MSPV. This is why our efforts to make the current MSPV 

contracts more robust are important. We want to make sure the needs of our medical centers are met while we develop a better approach to MSPV. 

GAO Report 

GAO recently released the report, ‘‘Veterans Affairs Contracting: Improvements in 

Buying Medical and Surgical Supplies Could Yield Cost Savings and Efficiency.’’ 

GAO made 10 recommendations concerning our current MSPV management processes, and VA has already begun to institute each of them: 

• VHA is developing an implementation plan that clearly articulates our strategy 

for the MSPV program. The plan will include how to prioritize categories of supplies for future requirement development and contracting. This document will 

also serve as a communication tool for all stakeholders involved in MSPV. We 

expect the first draft to be completed by the end of calendar year (CY) 2017. 

• Hiring a permanent program office director for MSPV is a high priority. We expect a vacancy announcement to be posted by the end of CY 2017. 

• VA acknowledges that the role of Chief Acquisition Officer should be assigned 

to a non-career employee, per the third GAO recommendation, but our flexibility is limited by restrictions on non-career positions within the Department. 

• To ensure we are providing complete guidance for matching equivalent supply 

items, VHA has replaced the MSPV Item Conversion Tracker Tool with the 

Medical Product Data Bank eZSave program, which collects product information 

from over 80 government and private sources. We will conduct a review by the 

end of this CY to measure our success. 

• Similarly, we are developing a communication plan to ensure frequent and effective outreach to the medical centers concerning the criteria and processes for 

changing items of the formulary. We fully expect that several modes of communication will be in use by the end of this CY. 

• VHA is developing a new metric for MSPV cost avoidance. The implementation 

of this metric is contingent upon the completion of a separate data standardization project, but we anticipate this new metric will take effect by June 2018. 

• VHA plans to replace or modify the current MSPV contract and formulary process with a contract which will facilitate greater access to a wider variety of 

products, using best commercial and government practices. This plan includes 

providing improved service until the current contract is modified or replaced. 

• VHA will emphasize the importance of clinical program offices’ involvement in 

MSPV requirements development and standardization efforts. Proposed guidance is being finalized, enabling clinical program offices to directly manage the 

selection of items in the formulary related to their clinical expertise. By the end 

of CY 2018, clinical program offices will prioritize their requirements and will 

emphasize standardization where clinically acceptable. 

• VHA is formalizing guidance for contracting offices, the Supply Chain Data and 

Informatics Office, and medical centers to ensure they work together to identify 

opportunities for strategically obtaining goods and services on an emergency 

basis. The target completion date is June 2018. 

• VHA will establish a process to identify commodities and supplies that are frequently purchased using emergency procurement methods. These items will be 

evaluated for inclusion in the MSPV formulary, if appropriate, by June 2018. 

Conclusion 

VA seeks to continue to provide our Veterans with the timely care they have 

earned and deserve. At the same time, we are seeking new and innovative ways to 

be more responsible stewards of the taxpayers’ dollars. We are grateful to GAO for 

their report and to the Committee for their commitment to helping the Department 

improve. I look forward to responding to any questions you may have. 

f 

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1Department of Veterans Affairs Office of Inspector General, Interim Summary Report (Washington, D.C.: Apr. 12, 2017). 2GAO, Veterans Affairs Contracting: Improvements in Buying Medical and Surgical Supplies 

Could Yield Cost Savings and Efficiency, GAO 18 34 (Washington, D.C.: Nov. 9, 2017). 3GAO, Standards for Internal Control in the Federal Government, GAO 14 704G (Washington, D.C.: Sept. 10, 2014). 4We selected these hospital networks because they were identified by an industry study as 

having leading supply chain practices. See Gartner, Inc., The Healthcare Supply Chain Top 25 

for 2015 (Nov. 18, 2015). 5See GAO 18 34. 

Prepared Statement of Shelby S. Oakley 

VETERANS AFFAIRS CONTRACTING 

IMPROVEMENTS IN BUYING MEDICAL AND SURGICAL SUPPLIES COULD YIELD COST

SAVINGS AND EFFICIENCY

Chairman Roe, Ranking Member Walz, and Members of the Committee: 

In December 2016, the Department of Veterans Affairs (VA) launched the Medical 

Surgical Prime Vendor-Next Generation (MSPV–NG) program as its primary means 

for purchasing supplies, such as bandages and scalpels, for 170 VA medical centers. 

These supplies are intended to meet the health care needs of about 7 million veterans. In fiscal year 2015, VA obligated $465 million for these types of supplies, 

and, in 2016, it stated that it planned to achieve $150 million in cost avoidance 

through a supply chain transformation effort, which includes MSPV–NG. This transition represents a significant change to how medical and surgical supplies are purchased, which has raised questions about whether MSPV–NG will appropriately balance medical needs with logistical efficiency, and whether VA can achieve its 

planned cost avoidance. Effective supply chain management is an essential part of 

delivering quality health care to veterans-for instance, an April 2017 interim report 

issued by the VA Inspector General detailed supply management issues at the District of Columbia VA Medical Center that posed risks to patient care. 1

My remarks today are based on our recently issued report on the MSPV–NG program, and I will summarize a few key findings from that report. 2 Specifically, I will 

address the extent to which VA’s implementation of MSPV–NG has been effective 

in meeting program goals. 

As part of our work for our November 2017 report, we reviewed VA policy, communications, briefings, and other documents, prior GAO reports on best practices for 

organizational transformation, and internal control standards. 3 We interviewed Veterans Health Administration (VHA)- and VA-wide procurement leaders, program office managers, and members of three integrated product teams who helped develop 

the product descriptions for supply items (known as requirements). We also interviewed supply chain managers from four leading hospital networks regarding their 

medical supply management practices and compared them to those used by VA 

when implementing the MSPV–NG program. 4 To assess VA’s MSPV–NG contracting process, we analyzed the contents of the formulary (a list of specific items 

that medical centers are allowed to purchase) to determine what acquisition instrument was used to add the items. We determined that the MSPV–NG formulary data 

were sufficiently reliable by tracing data to a sample of source documents, among 

other steps. We selected three VHA regional networks based on those with the highest total contract obligations in fiscal years 2014 through 2016, geographic diversity, 

and other factors. We conducted site visits to six medical centers within these three 

regional networks, interviewing contracting and clinical officials. Finally, we obtained and analyzed data on VA’s metrics for the program and determined the data 

were sufficiently reliable for our purpose of measuring utilization by interviewing 

officials responsible for maintaining the data and other measures. 

More detailed information on our objectives, scope, and methodology for our work 

can be found in our November 9, 2017 report. 5 We conducted the work on which 

this statement is based 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. 

Background 

MSPV–NG Program 

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6The Federal Supply Schedules program, managed by the General Services Administration, 

provides federal agencies a simplified method of purchasing commercial products and services 

at prices associated with volume buying. The General Services Administration has delegated authority to VA to manage health-care-related supplies and services. For more details on the legacy MSPV program, see GAO, Veterans Affairs Contracting: Improvements in Policies and Processes Could Yield Cost Savings and Efficiency, GAO 16 810 (Washington, D.C.: Sept. 16, 2016). 7See GAO 16 810. 

For over a decade, each of VA’s 170 medical centers used VHA’s legacy MSPV program to order medical supplies, such as bandages and scalpels. Many of those items 

were purchased using the Federal Supply Schedules, which provided medical centers with a great deal of flexibility. 6 However, as we reported in 2016, this legacy 

program prevented VHA from standardizing items used across its medical centers 

and affected its ability to leverage its buying power to achieve greater cost avoidance. 7 Standardization is a process of narrowing the range of items purchased to 

meet a given need, such as buying 10 varieties of bandages instead of 100, in order 

to improve buying power, simplify supply chain management, and provide clinical 

consistency. In part because of the legacy MSPV program’s limited standardization, 

VHA decided to transition to a new iteration, called MSPV–NG. 

The transition to MSPV–NG has been a major effort, involving the MSPV–NG 

program office, stakeholders from the VHA’s Procurement and Logistics Office and 

VA’s Strategic Acquisition Center (SAC)-a VA-wide contracting organization-and logistics and clinical personnel at every medical center. The program also includes 

hundreds of new contracts with individual supply vendors and a new set of prime 

vendor contracts to distribute the supplies. 

VA’s goals for the MSPV–NG program include (1) standardizing requirements for 

supply items for greater clinical consistency; (2) demonstrating cost avoidance by 

leveraging VA’s substantial buying power when making competitive awards; (3) 

achieving greater efficiency in ordering and supply chain management, including a 

metric of ordering 40 percent of medical centers’ supplies from the MSPV–NG formulary; and (4) involving clinicians in requirements development to ensure uniform 

clinical review of medical supplies. 

VHA launched the MSPV–NG program in December 2016, but allowed a 4-month 

transition period. After April 2017, medical centers could no longer use the legacy 

program. MSPV–NG now restricts ordering to a narrow formulary. VHA policy requires medical centers to use MSPV–NG-as opposed to other means such as open 

market purchase card transactions-when purchasing items that are available in the 

formulary. 

Supply Chain Practices Identified by Selected Leading Hospital Networks 

Leading hospital networks we spoke with have similar goals to VA in managing 

their supply chains, including clinical standardization and reduced costs. These hospital networks reported they analyze their spending to identify items purchased 

most frequently, and which ones would be the best candidates to standardize first 

to yield cost savings. The hospitals’ supply chain managers reported establishing 

consensus with clinicians through early and frequent collaboration, understanding 

that clinician involvement is critical to the success of any effort to standardize their 

medical supply chain. By following these practices, these hospital networks have reported they have achieved significant cost savings in some cases, and the potential 

for improved patient care, while maintaining buy-in from their clinicians. 

VHA’s Implementation of MSPV–NG Program Has Not Yet Achieved Its 

Goals 

VHA’s implementation of the MSPV–NG program-from its initial work to identify 

a list of supply requirements in early 2015, through its roll-out of the formulary to 

medical centers in December 2016-was not executed in line with leading practices. 

Specifically, VHA lacked a documented program strategy, leadership stability, and 

workforce capacity for the transition that, if in place, could have facilitated buy-in 

for the change throughout the organization. Further, the initial requirements development process and tight timeframes contributed to ineffective contracting processes. As a result, VHA developed an initial formulary that did not meet the needs 

of the medical centers and has yet to achieve utilization and cost avoidance goals. 

VA made some changes in the second phase of requirements development to address 

deficiencies identified in the initial roll out. Key among these was to increase the 

level of clinical involvement, that is, to obtain input from the doctors and nurses 

at VA’s individual medical facilities. Despite changes aimed at improving implementation, the agency continues to face challenges that prevent the program from fully 

achieving its goals. 

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8GAO, Organizational Transformation: A Framework for Assessing and Improving Enterprise 

Architecture Management, GAO 10 846G (Washington, D.C.: August 2010); and Results-Oriented Cultures: Implementation Steps to Assist Mergers and Organizational Transformations, 

GAO 03 669 (Washington, D.C.: July 2, 2003). 9GAO, High-Risk Series: An Update, GAO 15 290 (Washington, D.C.: Feb. 11, 2015). 

10The fiscal year 2014 data on historical purchasing by medical centers came from the Medical Product Data Bank database, jointly funded by VA and the Department of Defense, and 

was the principal source for identifying potential items to include on the initial version of the 

MSPV–NG formulary. 

VA’s Lack of an Overarching Strategy and Leadership Instability Were Obstacles to Effective Implementation of MSPV–NG 

VA did not document a clear overall strategy for the MSPV–NG program at the 

start and has not done so to date. About 6 months after our initial requests for a 

strategy or plan, a VHA official provided us with an October 2015 plan focusing on 

the mechanics of establishing the MSPV–NG formulary. However, this plan was 

used only within the VHA Procurement and Logistics Office and had not been approved by VHA or VA leadership. Leading practices for organizational transformation state that agencies must have well-documented plans and strategies for 

major initiatives (such as MSPV–NG) and communicate them clearly and consistently to all involved-which included VHA headquarters, the SAC, and all 170 medical centers. 8 Without such a strategy, VA could not reasonably ensure that all 

stakeholders understood VHA’s approach for MSPV–NG and worked together in a 

coordinated manner to achieve program goals. In our November 2017 report, we recommended that the Director of the MSPV–NG program office should, with input 

from SAC, develop, document, and communicate to stakeholders an overarching 

strategy for the program, including how the program office will prioritize categories 

of supplies for future phases of requirement development and contracting. VA 

agreed with this recommendation and reported it would have a strategy in place by 

December 2017. 

Leadership instability and workforce challenges also made it difficult for VA to 

execute its transition to MSPV–NG. Our work has shown that leadership buy-in is 

necessary to ensure that major programs like MSPV–NG have the resources and 

support they need to execute their missions. 9 Due to a combination of budget and 

hiring constraints, and lack of prioritization within VA, the MSPV–NG program office has never been fully staffed and has experienced instability in its leadership. 

As of January 2017, 24 of the office’s 40 positions were filled, and program office 

officials stated that this lack of staff affected their ability to implement certain aspects of the program within the planned timeframes. In addition, since the inception 

of MSPV–NG, the program office has had four directors, two of whom were acting 

and two of whom were fulfilling the director position while performing other collateral duties. For instance, one of the acting MSPV–NG program office directors was 

on detail from a regional health network to fulfill the position, but had to abruptly 

leave and return to her prior position due to a federal hiring freeze. In our November 2017 report, we recommended that VHA prioritize the hiring of a MSPV–NG 

program director on a permanent basis. VA agreed with this recommendation and 

indicated a vacancy announcement will be posted by the end of 2017. 

The MSPV–NG Initial Requirements Development Process Had Limited Clinician Involvement and Did Not Prioritize Categories of Supplies 

The MSPV–NG program office initially developed requirements for items to be included in the formulary based almost exclusively on prior supply purchases, with 

limited clinician involvement. The program office concluded in its October 2015 formulary plan that relying on data from previous clinician purchases would be a good 

representation of medical centers’ needs and that clinician input would not be required for identifying which items to include in the initial formulary. 10 Further, 

rather than standardizing purchases of specific categories of supplies-such as bandages or scalpels-program officials told us they identified medical and surgical items 

on which VA had spent $16,000 or more annually and ordered at least 12 times per 

year, and made those items the basis for the formulary. Officials said this analysis 

initially yielded a list of about 18,000 items, which the program office further refined to about 6,000 items by removing duplicate items or those that were not considered consumable commodities, such as medical equipment. This approach to requirements development stood in sharp contrast to those of the leading hospital networks we met with, which rely heavily on clinician input to help drive the standardization process and focus on individual categories of supplies that provide the best 

opportunities for cost savings. 

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Requirements Development and Tight Time Frames Contributed to Ineffective Contracting Practices for Initial Formulary 

Based on the requirements developed by the program office, SAC began to issue 

competitive solicitations for the 6,000 items on the initial formulary in June 2015. 

Medical supply companies had responded to about 30 percent of the solicitations as 

of January 2016. As a result, according to SAC officials, they conducted outreach 

and some of these companies responded that VHA’s requirements did not appear to 

be based on clinical input and instead consisted of manufacturer-specific requirements that favored particular products instead of broader descriptions. Furthermore, SAC did not solicit large groups of related items, but rather issued separate 

solicitations for small groups of supply items-consisting of three or fewer items. This 

is contrary to industry practices of soliciting large groups of related supplies together. Therefore, according to SAC officials, some medical supply companies told 

them that submitting responses to SAC’s solicitations required more time and resources than they were willing to commit. 

By its April 2016 deadline for having 6,000 items on the formulary, SAC had been 

working on the effort for over a year and had established competitive agreements 

for about 200 items, representing about 3 percent of the planned items. Without 

contracts for the items on the formulary in place, VA delayed the launch of the 

MSPV–NG program until December 2016 and SAC began establishing non-competitive agreements in the last few months before the launch of MSPV–NG. As shown 

in figure 1, these non-competitive agreements accounted for approximately 79 percent of the items on the January 2017 version of the formulary. While this approach 

enabled the MSPV–NG program office to establish the formulary more quickly, it 

did so at the expense of one of the primary goals of the MSPV–NG programleveraging VA’s buying power to obtain cost avoidance through competition. 

Initial Formulary Did Not Meet Medical Center Needs, Resulting in Low 

Utilization of MSPV–NG and a Missed Opportunity to Leverage VA’s 

Large Buying Power 

Once VA’s MSPV–NG initial formulary was established in December 2016, each 

medical center was charged with implementing it. According to logistics officials we 

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11The one facility that met the target, Hampton VA Medical Center, is categorized by VA as 

a smaller, less complex facility, and had fewer items to match, which could contribute to its 

higher utilization. 

spoke with at selected medical centers, they had varying levels of success due, in 

part, to incomplete guidance from the program office. Without clear guidance, many 

medical centers reported they were unable to find direct matches or substitutes on 

the MSPV–NG formulary for a substantial number of items they routinely used, 

which negatively impacted utilization rates for the initial formulary. In our November 2017 report, we recommended that the Director of the MSPV–NG program office 

provide complete guidance to medical centers for matching equivalent supply items. 

VA agreed with this recommendation and indicated it would provide this guidance 

to medical centers by December 2017. 

According to SAC, as of June 2017, only about a third of the items on the initial 

version of the formulary were being ordered in any significant quantity by medical 

centers, indicating that many items on the formulary were not those that are needed by medical centers. Senior VHA acquisition officials attributed this mismatch to 

shortcomings in their initial requirements development process as well as with VA’s 

purchase data. 

VA had set a target that medical centers would order 40 percent of their supplies 

from the MSPV–NG formulary, but utilization rates were below this target with a 

nationwide average utilization rate across medical centers of about 24 percent as of 

May 2017. Specifically, Chief Supply Chain Officers-who are responsible for managing the ordering and stocking of medical supplies at six selected medical centerstold us that many items they needed were not included in the MSPV–NG formulary. 

As such, we found that these six medical centers generally fell below VA’s stated 

utilization target. As shown in figure 2, among the six selected medical centers we 

reviewed, one met the target, while the remaining five were below 25 percent utilization. 11

Instead of fully using MSPV–NG, the selected medical centers are purchasing 

many items through other means, such as purchase cards or new contracts awarded 

by their local contracting office, in part, because they said the formulary does not 

meet their needs. These approaches run counter to the goals of the MSPV–NG program and contribute to VA not making the best use of taxpayer dollars. 

Greater utilization of MSPV–NG is essential to VA achieving the cost avoidance 

goal of $150 million for its supply chain transformation effort. Under the legacy 

MSPV program, the National Acquisition Center tracked cost avoidance achieved by 

comparing prices for competitively-awarded MSPV supply contracts with prices 

available elsewhere. However, VHA officials stated that they are not currently 

tracking cost avoidance related specifically to MSPV–NG. In our November 2017 report, we recommended that the VHA Chief Procurement and Logistics Officer, in coordination with SAC, should calculate cost avoidance achieved by MSPV–NG on an 

ongoing basis. VA agreed with this recommendation and reported it would develop 

a new metric to measure cost avoidance by June 2018. 

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12Work on Phase 2 began while medical centers were implementing Phase 1 and beginning 

to order from the MSPV–NG formulary. 13 According to VA, the agency plans to use indefinite delivery/indefinite quantity contracts 

in addition to blanket purchase agreements for Phase 2. 

VA Continues to Encounter Requirements Development and Contracting 

Challenges as It Works to Address MSPV–NG Shortcomings 

In Phase 2 of MSPV–NG, the program office has taken some steps to incorporate 

greater clinical involvement in subsequent requirements development, but both its 

requirements development and SAC’s contracting efforts have been hampered by 

staffing and schedule constraints. 12 In the fall of 2016, the program office began to 

establish panels of clinicians to serve on MSPV–NG integrated product teams (IPT) 

assigned to the task of developing updated requirements for the second phase of the 

formulary. Program officials said they had difficulty recruiting clinicians to participate. We found that slightly more than half (20 of the 38) of the IPTs had begun 

their work to review items and develop updated requirements by the time the 

MSPV–NG program launched in December 2016. Staff on the IPTs had to complete 

their responsibilities by the end of March 2017 while simultaneously managing their 

regular workload as physicians, surgeons, or nurses. 

By early March 2017, the IPTs still had about 4,200 items to review. Faced with 

meeting this unrealistic timeframe, the MSPV–NG program office had 9 IPT members travel to one location-with an additional 10 members participating virtuallyto meet for 5 days to review the remaining items. Members told us that this time 

pressure limited the extent to which they were able to pursue the goal of standardizing supplies, and that their review ended up being more of a data validation exercise than a standardization review. VHA ultimately met this compressed timeline, 

but in a rushed manner that limited the impact of clinician involvement. 

In our November 2017 report, we recommended that the VHA Chief Procurement 

and Logistics Officer use input from national clinical program offices to prioritize 

its requirements development and standardization efforts beyond Phase 2 to focus 

on supply categories that offer the best opportunity for standardization and cost 

avoidance. VA agreed with this recommendation and stated it is in the process of 

finalizing guidance that will detail the importance of involving the national clinical 

program offices in MSPV–NG requirements development and standardization efforts. 

The SAC plans to replace the existing Phase 1 non-competitive agreements with 

competitive awards based on the Phase 2 requirements generated by the IPTs, but 

it may not be able to keep up with expiring agreements due to an unrealistic schedule. 13 Because they were made on a non-competitive basis, the Phase 1 agreements 

were established for a period of 1 year. In order to keep the full formulary available, 

the SAC director said the staff must award 200 to 250 contracts before the Phase 

1 agreements expire later this year. SAC officials acknowledged that it is unlikely 

that they will be able to award the contracts by the time the existing agreements 

expire. According to SAC officials, they are in the process of hiring more staff to 

deal with the increased workload. Further, the SAC division director told us that 

they canceled all outstanding Phase 2 solicitations in September 2017 due to low 

response rates, protests from service-disabled veteran-owned small businesses, and 

changes in overall MSPV–NG strategy. 

In our November 2017 report, we recommended that the MSPV–NG program office and SAC should establish a plan for how to mitigate the potential risk of gaps 

in contract coverage while SAC is still working to make competitive Phase 2 awards, 

which could include prioritizing supply categories that are most likely to yield cost 

avoidance. VA agreed with this recommendation and indicated it has developed a 

plan to mitigate the risk of gaps in contract coverage with short- and mid-term procurement strategies to ensure continued provision of medical and surgical supplies 

to VHA facilities. The department also stated that it plans to replace the current 

MSPV–NG contract and formulary process with a new approach where the prime 

vendor would develop the formulary. However, VA will likely face challenges in this 

new approach until it fully addresses the existing shortcomings in the MSPV–NG 

program. 

Chairman Roe, Ranking Member Walz, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that 

you may have at this time. 

GAO Contacts and Staff Acknowledgments 

If you or your staff have any questions about this statement, please contact Shelby S. Oakley at 202–512–4841 or OakleyS@gao.gov. In addition, contact points for 

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our Offices of Congressional Relations and Public Affairs may be found on the last 

page of this statement. Individuals who made key contributions to the report on 

which this testimony is based are Lisa Gardner, Assistant Director; Emily Bond; 

Matthew T. Crosby; Lorraine Ettaro; Michael Grogan; Jeff Hartnett; Katherine 

Lenane; Teague Lyons; Roxanna Sun; and Colleen Taylor. 

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1GAO–16–810, Improvements in Policies and Processes Could Yield Cost Savings and Efficiency, September 2016 

Prepared Statement of Roger D. Waldron 

Good Morning Chairman Roe, Ranking Member Walz and Members of the House 

Committee on Veterans Affairs. Thank you for the opportunity to appear before you 

to address the VA Medical/Surgical Prime Vendor (MSPV) program, including its 

‘‘Next Generation’’ and ‘‘2.0’’ iterations. 

The Coalition for Government Procurement (The Coalition) is a non-profit association of firms selling commercial services and products to the Federal Government. 

Our members collectively account for more than $145 billion dollars of the sales generated annually through government contracts including the GSA Multiple Award 

Schedules (MAS) program, VA Federal Supply Schedule (FSS), the Governmentwide Acquisition Contracts (GWACs), and agency-specific multiple award contracts 

(MACs). Coalition members include small, medium, and large business concerns 

that provide more than $12 billion worth of medical/surgical products and pharmaceuticals to support the health care needs of veterans. The Coalition is proud to 

have worked with Government officials for more than 38 years towards the mutual 

goals of common sense acquisition and to support our veterans. 

As you know, the VA uses several strategies to acquire medical/surgical equipment and supplies including national contracts, federal supply schedules and the 

Medical/Surgical Prime Vendor (MSPV) program. It is critical that these programs 

work together consistently and effectively to create a high value acquisition and distribution system. The VA faces numerous challenges associated with the management of its hospitals and supply chain. Studies, reports, and analyses have been 

published about these challenges and possible solutions. In September 2016, the 

Government Accountability Office (GAO) made 10 recommendations to improve the 

efficiency and effectiveness of VA acquisitions. 1 On Monday GAO released a new 

report, GAO -18–34, ‘‘Veterans Affairs Contracting: Improvements in Buying Medical and Surgical Supplies Could Yield Cost Saving and Efficiency’’ which documents 

many of the challenges and impacts the of the MSPV–NG on the VHA customer and 

the VA’s industry partners over the last two years. 

Earlier this year, the Coalition was pleased to have submitted recommendations 

to the VA to reform its procurement operations in connection with the VA modernization program. Attachment 1 to this statement contains our detailed recommendations for: 

1. Establishing Clinician Leadership/Program Management 

2. Centralizing VA Procurement Operations 

3. Streamlining Unnecessary and Duplicative Regulations 

4. Improving IT Systems 

5. Reorganizing Pharmacy Benefits Program 

6. Reforming the Role of the VA Office of the Inspector General in Contracting 

The Coalition also has been privileged to prepare comments in response to the 

VA’s proposed MSPV 2.0. The MSPV program seeks to deliver a national strategic 

sourcing solution that combines a formulary approach with electronic cataloging and 

ordering to support the Veterans Administration Medical Centers. VA’s version 2.0 

would outsource the program to a single commercial contractor. The contractor 

would determine what the agency would buy, and how the items would be sourced, 

managed and distributed; administer contracts; and ensure quality control. Nationwide electronic ordering and invoicing would be facilitated using the commercial 

contractor’s e-commerce platform. 

Coalition members support VA’s objectives related to aligning the acquisition of 

medical/surgical products more with commercial best practices and increased efficiency. The current MSPV 2.0 proposal, however, leaves so many questions unanswered that, at this time, we are unable to make a realistic evaluation of its impact 

on veteran’s health, VA suppliers or the contracting process. Our questions and 

areas of concern are described in detail in Attachment 4 to this statement. 

The Coalition has several fundamental concerns that our members believe must 

be addressed to ensure the success of the MSPV program and/or any future VA program for the application of medical/surgical equipment and supplies. Specifically, we 

believe that the VA needs to: 

1.Establish a strong program office, led and managed by clinicians 

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2.Be clear that best value for the veteran, not price, will drive program requirements 

3.Maximize alignment with commercial practice 

4.Leverage competition to benefit the prime vendor program 

A Clinically Led and Managed Program Management Office 

Our members continue to emphasize that a program office led and managed by 

clinicians is a commercial best practice and is critical to implementation of a successful prime vendor program that supports President Lincoln’s promise ‘‘To care for 

him who shall have borne the battle, and for his widow, and his orphan’’. The foundation for an effective and efficient VA medical supply program, focused squarely 

on the needs of veterans, is a VHA program office that is led by health care professionals with both clinical and medical supply chain expertise. A clinically led program office possesses the breadth of skills and experience to make effective and efficient evaluation of medical devices and overall product decisions that result in optimal outcomes and best value for patients and practitioners across the VA health 

care system. Our experience with MSPV–NG has shown that without clinical program leadership and management, VA is destined to have MSPV strategies and decisions that are focused on, and driven by, the government ‘‘procurement process,’’ 

potentially compromising the health care needs of veterans. 

The lack of clinician and medical supply chain experience within the VHA medical/surgical Program Office has led what appears to be the view that medical and 

surgical products are simple and interchangeable commodities. This view simply is 

not the case; these acquisitions cover highly regulated and complex medical products 

with unique characteristics that directly impact patient outcomes in VA facilities. 

Under the current program, there have been several issues which seem to be contract-driven, rather than clinician-driven. For example, the practice of awarding a 

limited number of line items, rather than the standard commercial practice of 

awarding contracts for coordinated suites of products. This practice: 

1.Leads to inefficiencies at VA facilities. The unavailability of certain products can 

impact the ability to perform medical procedures, often resulting in cancellations, 

and it consumes valuable nursing time to find and source products; 

2.Challenges industry in the solicitation process to recognize individual product 

codes that may be buried in unfamiliar groupings, increasing the potential misalignment of expectations and performance; and 

3.Raises concerns for the practice of medical care by end-users. Awarding different 

medical products within a suite of products may require additional training for VA 

medical staff to ensure appropriate use, increasing time pressures on already 

stressed medical staff, and potentially introducing safety risks through the expansion of product variation. 

The proposed MSPV 2.0 does not address the imperative of a clinically-led, successful program office. In fact, MSPV 2.0, as we understand the vision, likely will 

exacerbate the clinician vacuum by vesting in a commercial entity, the responsibility 

and authority to develop, determine and manage what products are included on the 

MSPV formulary and how such products are sourced. Coalition members have 

raised questions as to how the VA will ensure that this ‘‘super’’ prime vendor will 

ensure an appropriate clinical role when making formulary decisions that prioritize 

patient outcomes for our nation’s veterans. Moreover, they are concerned that there 

is no assurance that formulary items are NOT selected by the MSPV 2.0 contractor 

based on competing business interests/decisions rather than the health care needs 

of veterans. The establishment of a program office with strong leadership by clinicians who have medical supply chain expertise is necessary to assure well-developed 

technical requirements that address these concerns. Best value outcomes start with 

sound, effective and clear customer requirements in this regard. 

Coalition members continue to report a lack of clinician input in developing technical requirements. For example, in connection with MSPV–NG, the Strategic Acquisition Center (SAC) establishes IDIQs and BPAs based on requirements developed in consultation with the procurement and logistics arm of the VHA. Clinicians 

apparently provide input in some instances, though there is a lack of transparency 

regarding these decisions. Under these circumstances, members are concerned that 

award decisions are based on price and not best value for veterans’ health care. It 

is their experience that a lack of clinical input has led to an incomplete formulary, 

which causes supply shortages and may require facilities to purchase items via the 

open market, often at a high cost, on government purchase cards. Robust clinical 

leadership during the requirements development process would avoid such probleonard.horne on VACREP0180 with DISTILLER

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lems. It is not enough to formalize the current ‘‘clinical input’’ process (the VHA’s 

Integrated Product Teams) being utilized under MSPV–NG for the future 2.0 program. See Attachment 2 providing additional background and recommendations on 

creating a clinician led program office. 

Best Value 

Veterans cannot be relegated to ‘‘low price technically acceptable’’ health care, and 

for this reason, the VA must clearly assert that value, i.e., the facilitation of the 

most positive health care outcomes for veterans, not raw low price, is the objective 

when acquiring medical equipment and supplies for our nation’s veterans. Value 

drives positive health care outcomes for veterans. Coalition members understand 

that a significant objective for the MSPV 2.0 is cost savings. The MSPV 2.0 vision, 

to date, however, provides little-to-no detail regarding how cost savings will be 

measured and considered in the context of medical outcomes, supply chain efficiencies, or the like. Further, there is no detail as to whether the responsibility for 

making these important decisions will rest with the MSPV 2.0 contractor or the government. Without a clear articulation of a VA position that value, not price is the 

driving force, there is little incentive for a contractor to offer the latest innovative, 

but perhaps more expensive new, life-saving technology for our veterans. Given this 

lack of clarity, coupled with the abense of a clinician led and managed program office, the Coalition members are concerned that financial incentives, rather than a 

focus on patient outcomes, will drive the program. Clinical expertise is essential to 

making best value selections of medical and surgical products. 

Attachment 3 includes a letter from the Coalition to the VAC SAC regarding low 

price technically acceptable evaluation methodology for medical/surgical items. 

Commercial Practice 

To assure streamlined processes and reasonable prices, we strongly urge the VA 

to align with best commercial practices. In issuing the RFI for MSPV 2.0, VA stated 

that alignment with commercial practice was a key objective. Paragraph 2.0 of the 

Scope section of the RFI, however, provides that one contractor will be responsible 

for ‘‘developing a medical surgical supply and equipment formulary for each facility 

in the VA.., [and will] provide strategic sourcing, life cycle management, distribution, inventory management and analysis services, quality control/quality assurance 

support services, and warranty management services for materials they are responsible for providing.’’ This approach is inconsistent with commercial practice. Indeed, 

Coalition members report that there is no comparable commercial model that provides for a super prime vendor essentially responsible for developing, designing, and 

managing a formulary while at the same time distributing, delivering, and managing all the products listed on that formulary. 

In particular, as noted in Attachments 2 and 4, the RFI’s approach does not reflect the complexity associated with establishing, competing, and managing the requirements for a medical/surgical prime vendor catalog world-wide. As currently 

constructed, the RFI proposes the execution of a competition within a few months. 

For comparison, our members have explained to the VA that pursuant to the commercial model, which represents 98–99% of the US market for medical devices, a 

commercial organization, with a clinically led program office, typically takes approximately four years to successfully compete such a catalogue. 

In addition, our experience with MSPV–NG has shown that the VA does not utilize the established medical product categories that are used in the commercial market. Although VHA has attempted to create product categories, an improvement 

upon the current line item competitions, these categories are government-unique 

and not recognized by industry. Following product categories that are well known 

in the commercial market increases the likelihood of developing a comprehensive 

scope of formulary products that meet the needs of clinicians in the VA medical system. To do otherwise risks suffering significant gaps in the availability of medical 

and surgical products on the Formulary, similar to the experience under the current 

MSPV–NG contracts 

Further, MSPV 2.0 should allow companies to distribute their products to the VA 

as they do for commercial hospitals. Specifically, although many medical products 

are available through medical/surgical distributers, a considerable number of medical devices are only available through direct acquisition from manufacturers. Direct 

ordering from manufacturers for certain products is a standard commercial practice 

typically driven by medical safety requirements and the corresponding chain of custody tracking to ensure traceability of product. In these circumstances it is neither 

appropriate nor efficient to stock these through distributors. Thus, the VA should 

look to other alternatives such as separate IDIQ contracts of the Schedules program, 

as appropriate. 

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In sum, prior to launching MSPV 2.0, the Coalition recommends that the VA take 

the time to identify commercial best practices for the medical supply chain and align 

the VA’s purchasing strategy accordingly. 

Competition 

Finally, VA’s proposal for MSPV 2.0 in the RFI assigns one commercial entity responsibility for making critical decisions that, generally are reserved to the government, specifically, what to buy, how to buy, and contract administration. The Coalition cannot emphasize enough its recommendations that the VA establish the MSPV 

2.0 formulary, based on requirements developed by a clinically led program office, 

rather than outsourcing this function to a contractor. The establishment of the formulary for veterans is an inherently governmental function that should be conducted by the government and not a private entity. It is the VA’s responsibility to 

identify the medical and surgical products that meet the health care needs of veterans at best value to taxpayers, as the VA possesses unparalleled expertise and 

intimate understanding of the panoply of needs of this client base. A private entity 

does not, and thus to allow that private entity to do so would risk formulary decisions being made based on an individual contractor’s business and financial incentives, rather than the best interest of veterans. It is also a direct business conflict 

of interest for a single contractor to both manage and perform the requirement. 

Here, the contractor would be responsible for the overall development/management 

of the formulary and delivery of all the items listed on that formulary 

The VA’s proposal also would allow a single 2.0 prime vendor to have total control 

over the program, without any readily discernible checks, and it assumes that further consolidation of the MSPV program is desirable. The Coalition believes that 

this approach is flawed because it fails to recognize the is the value to competition 

and having multiple prime vendors to supply VA health care facilities world-wide. 

For instance, distribution is a commercial activity, with many competent players at 

a regional or sub-regional level. Rather than leverage competition among those players, VA’s MSPV 2.0 vision cedes disproportionate market power to one firm. Over 

time, vesting too much authority into a single contractor is not good for government 

or its supplier base because it enables the contractor to control not only the federal 

market, but also federal suppliers in ways that may be detrimental to the government and the ultimate customer, veterans. By way of example, this disproportionate 

market power can affect: 

• VA’s ability to replace a non-performing prime vendor • A supplier’s ability to access VA procurement through a single point of entry • Continual performance improvement over the life of the contract due to competition • The ability of small/small disabled veteran businesses to either contract with 

VA directly as prime contractors or successfully participate in the prime vendor 

program. 

VA is still in the process of creating its vision for MSPV 2.0. Program development and implementation will likely occur over an extended period of time. Given 

the millions of veterans impacted by the program, the Coalition strongly urges VA 

to stabilize the current program while it takes the time to explore future options. 

We recommend that VA immediately launch a clinician led management program 

office that will lead initiatives to both shore up the current MSPV–NG program, and 

help build future programs. The program office should have a clinical leader and 

clinical staff, mixed with experienced medical supply chain professionals. We also 

recommend that VA reinvigorate use of the VA Federal Supply Schedule contracts 

(Schedules) to help stabilize the current program and streamline procedures at the 

VA National Acquisition Center to support the MSPV–NG program. In the past the 

VA and its prime vendors relied heavily on Schedules to supply medical/surgical 

equipment and supplies. The Schedules feature: 

• Established contract relationships with major suppliers; 

• A broad representation of small and large contractors; 

• Extensive choices among commercial products; and 

• Streamlined ordering that allows VA to leverage its volume. 

With an anticipated rise in the micro-purchase threshold, the Schedules should 

become easier to use than they are now. The Coalition has submitted to VA a number of recommendations to streamline the Schedules contracting process and enhance the government’s ability to add new and innovative products and services. We 

have attached those recommendations to this statement. 

Thank you for the opportunity to submit this statement. I will be happy to answer 

questions. 

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Attachment 1 

August 2, 2017 

Mr. Greg Giddens 

Modernization Lead 

Department of Veterans Affairs 

810 Vermont Ave, NW 

Washington, DC 20420 

Subject: Department of Veterans Affairs Modernization 

Dear Mr. Giddens, 

The Coalition for Government Procurement (Coalition) appreciates the opportunity to submit comments regarding the reorganization and modernization efforts 

at the Department of Veterans Affairs (VA). 

The Coalition for Government Procurement (The Coalition) is a non-profit association of firms selling commercial services and products to the Federal Government. 

Our members collectively account for more than $145 billion dollars of the sales generated through government contracts including the GSA Multiple Award Schedules 

(MAS) program, VA Federal Supply Schedule (FSS), the Government-wide Acquisition Contracts (GWAC), and agency-specific multiple award contracts (MAC). Coalition members include small, medium, and large business concerns that provide more 

than $12 billion worth of pharmaceuticals and medical/surgical products to support 

health care needs of our nation’s veterans. The Coalition is proud to have worked 

with Government officials for more than 38 years towards the mutual goals of common sense acquisition and support for our veterans. 

The Coalition is submitting these comments on behalf of our members in response 

to the ‘‘Executive Order on a Comprehensive Plan for Reorganizing the Executive 

Branch,’’ directing agencies to enhance efficiency, effectiveness, and accountability 

by reorganizing and eliminating unnecessary agencies, components, and programs. 

The Coalition sincerely appreciates the opportunity to provide input regarding opportunities to increase efficiencies in VA’s acquisition functions. If there are any 

questions I may be reached at (202) 331–0975 or rwaldron@thecgp.org. 

Sincerely, 

Roger Waldron 

President 

VA Modernization Recommendations 

In Fiscal Year 2016, the VA obligated more than $23.2 billion to prime contractors-more than a third of the VA’s total discretionary budget. Contractors are essential to the VA’s mission, providing pharmaceuticals, services, and medical supplies 

and equipment that are required for the care for our Nation’s veterans. The VA 

faces numerous challenges associated with the management of its hospitals and supply chain. Studies, reports, and analyses have been published about these challenges and possible solutions. Instead of duplicating this work, the Coalition’s comments solely focus on recommendations for reforming the VA’s procurement operations in order to maximize quality health care services for veterans. The Coalition 

recommends: 

1.Increasing Clinician Input 

2.Centralizing VA Procurement Operations 

3.Streamlining Unnecessary and Duplicative Regulations 

4.Improving IT Systems 

5.Reorganizing Pharmacy Benefits Program 

6.Reforming the Role of the VA Office of the Inspector General in Contracting 

1. Increasing Clinician Input 

Coalition members report that there is a lack of clinician input in the VA procurement process. For example, for MSPV–NG, the Strategic Acquisition Center (SAC) 

establishes IDIQs and BPAs based on requirements developed in consultation with 

the procurement and logistics arm of the Veterans Health Administration (VHA). 

Clinicians apparently provide input in some instances, though there is a lack of 

transparency regarding these decisions and members are concerned that the awards 

are primarily based on price, rather than best value for veterans’ health care. A lack 

of clinical input will lead to an incomplete formulary, which causes supply shortages 

and may require facilities to directly purchase items. Likewise, input by clinicians 

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into the selection of drugs and biologics for the National Formulary is not transparent and there are impediments to drug company representatives providing information to VA medical professionals regarding clinical aspects of non-formulary 

drugs. By comparison, as discussed below, the Department of Defense (DoD) has a 

process for formulary decision-making that includes input from manufacturers and 

representatives of Tricare beneficiaries and publication of the basis for the Pharmacy and Therapeutics Committee recommendations. Additionally, there is no visibility into the process for transitioning care from DoD to the VA, including integration with DoD clinicians, to ensure the VA is providing access to products based on 

their effectiveness and appropriateness and not just low cost. 

Recommendations: 

• Create an office (similar in function to Pharmacy Benefits Management (PBM) 

and Prosthetics and Sensory Aids Service) which is responsible for providing clinician input to the MSPV–NG • Streamline the VHA procurement bureaucracy to allow clinicians to have more 

input in ordering-including, as suggested below, streamlining and merging the 

acquisition functions of the VHA and OALC. • Provide greater transparency in clinician’s product recommendations similar to 

the PBM 

2. Centralizing VA Procurement Operations 

The decentralized nature of the VA’s procurement operations at the VA headquarters level and within the Veterans Health Administration (VHA) leads to significant inefficiencies and delays in the delivery of health care products and services 

to veterans compared to the commercial market. 

VA procurement offices, like the Strategic Acquisition Center and National Acquisition Center, report to different management offices at VA headquarters leading to 

duplication, and a lack of coordination and consistency in how health care products 

and services are purchased by the VA. Currently, many VA suppliers invest in contracting with the VA through both the Federal Supply Schedules (FSS) program and 

the Medical/Surgical Prime Vendor (MSPV) program for the same products. Consolidating the operations and leadership of these programs would lead to greater consistency and drive process improvements that would reduce costs for contractors. 

Reduced operational costs will allow for increased health care services for veterans. 

Recommendations: 

• Streamline and centralize the VA’s acquisition operations—move the NAC and 

the SAC into the same organization. Additionally, the VA should merge the acquisition functions of the OALC and the VHA in order to streamline the procurement process. Coalition members remain concerned that clinician input 

(which comes from VHA) is divorced from contracting decisions made by the 

NAC and the SAC. • Develop standard operating procedures for the MSPV–NG and VAFSS programs 

with the goal of reducing acquisition lead times, developing greater consistency 

in requirements and interpretations of policies/procedures, adding new products 

to contract, streamlining solicitations and awards 

• Increase transparency and communications by: 

• Improving coordination and shared internal and external communications from 

the NAC and SAC 

• Establishing an Industry Liaison or ombudsman within each program to respond to general questions, refer contractors to appropriate VA resources, raise 

issues of concern with leadership 

• Establish standard processing times for the completion of modifications 

• Update the Priority for Use of Government Supply Sources to provide greater 

clarity to both VA purchasers and contractors 

• Extend VAFSS contract term to 5-year contracts with three 5-year option periods consistent with GSA Schedules to streamline processes for government and 

industry 

• Additionally, the VA’s should establish additional national contracts with Ordering Officer Delegation (OOD). Currently, only two national contracts have 

OOD; the lack of this capability forces contracting to a local level resulting in 

a slow process. 

3. Streamlining Unnecessary and Duplicative Regulations 

The current VA regulatory environment for procurement is overly burdensome 

and complex. Coalition members report that contract actions on the VA Schedules 

can take as much as three times longer than comparable actions on the GSA Schedleonard.horne on VACREP0180 with DISTILLER

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ules. While these regulations and long delays represent a significant burden for industry (including Veteran-Owned Small Businesses), the VA’s contracting workforce 

must also devote significant resources to compliance with certain regulatory requirements. Most importantly lack of a streamlined process fails to ensure that high 

quality products and services are available to veterans as quickly and efficiently as 

possible. 

Recommendations: 

• Eliminate the Price Reductions Clause (PRC). While the Coalition has consistently advocated for the removal of the PRC from the Schedules program, the 

need to remove the PRCis particularly evident for Schedule 65 I B Drugs, Pharmaceuticals, & Hematology Related Products, since the Veterans Health Care 

Act already controls the price of covered drugs. Ultimately, the PRC’s only one 

regulation which is unnecessary and duplicative. The VA Regulatory Reform Officer, in compliance with Executive Order 13777 ‘‘Enforcing the Regulatory Reform Agenda,’’ should be given the appropriate resources, particularly staff, to 

complete a thorough review to identify other unnecessary practices to eliminate 

and/or reform. 

• Create a FSS Program Office housed within GSA which would include VA acquisition professionals on detail. The office would ensure the alignment of GSA 

and VA/MAS policies, increase productivity, and reduce cycle time. The FSS 

Program Office would also be responsible for resolving differences between the 

VA and GSA on key regulatory and policy matters. The Coalition has identified 

several areas where the VA and GSA have different policy interpretations including: (i) negotiating for lowest price, considering terms and conditions, (ii) 

negotiating for products versus product lines, and (iii) the approach to resellers. 

4. Improving IT Systems 

There has been significant attention given to the VA’s electronic health records, 

but there are other IT systems which are in dire need of updates to support a better 

health care system for veterans. For example, the VA needs updates to its IT systems that handle basic business functions such as billing, claims, payment, and contract administration. An IT system that collects information on the VA’s supply 

chain utilization is also essential to identifying what the VA is purchasing, and how 

improvements can be made over time. Outdated IT systems and manual processes 

lead to unnecessary delays and inefficiencies in the VA health care system. 

Recommendations: 

• For the FSS program, leverage existing resources of the GSA such as e-offer 

and e-mod, which will reduce contracting time at the NAC. When administering 

the VA Schedules, the VA should focus on health care for veterans and leave 

FSS administrative matters to GSA. 

• The VA should establish an integrated IT system to support supply chain management. This system would be essential to resolving issues such as late payments and product shortages and better inform the VA about purchasing trends 

and behaviors. 

5. Reorganizing the Pharmacy Benefits Program 

DoD, in managing its pharmaceutical benefits program, permits clinical input 

from industry and beneficiaries during a transparent decision-making process that 

considers clinical and cost effectiveness of products. Ultimately, decisions focus on 

clinical/therapeutic attributes, as well as price. Additionally, DoD posts the basis for 

its decisions on a public website. Further, a Beneficiary Advisory Panel holds public 

meetings to comment on formulary recommendations before they are finalized including the effect on patients if prescribed medication will no longer be as accessible, for example if conditions are imposed on their use. New drugs are considered 

for formulary placement within a set time after coming on the market to ensure 

products are timely reviewed and those available through military treatment facilities are purchased. Additionally, DoD manages blanket purchase agreements (BPA) 

for pharmaceutical agents on its formulary through a class review process in order 

to leverage market forces. Coalition members remain concerned about the VA’s formulary process, which less structured than in DoD. The VA’s process could be 

strengthened by implementing a similar process, while increasing clinician input 

and improving outcomes for veterans. Finally, veterans receiving care remotely may 

not be able to easily travel to a VA facility to receive a prescription. Integrating retail pharmacies would resolve this issue and provide a better outcome for veterans. 

Recommendations: 

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• The VA should modify their formulary process by creating an effective, efficient, 

and integrated pharmacy benefits program modeled after the DoD program (see 

31 CFR a 199.21). Additionally, the VA should allow for manufacturer input and 

engage in frequent and effective communication with industry-for example DoD 

allows for manufacturer input in the decision- making process, will post the 

minutes from its meetings on their website, and has defined decision-making 

criteria. 

• Another important aspect of DoD’s process for procuring pharmaceuticals is 

that they will compete BPAs for agents that are added to the formulary, thereby taking advantage of volume discounts and market forces. The VA should 

adopt this model and issue a class deviation on the Multiple Award Schedule 

ordering procedures in FAR8.405–3 to streamline the process for creating single 

award BPAs for pharmaceutical agents on the formulary. The Coalition raised 

this issue in 2011 when the MAS ordering procedures were proposed, and we 

believe that the VAwould benefit from revisiting it. 

• New drugs should be reviewed for addition to the formulary within six months 

after they are available commercially. 

• Veterans receiving care remotely should not have to obtain their initial prescriptions from a VA facility, which could be many miles away, or through mail 

order, which could take two weeks. Allowing retail pharmacies to dispense initial prescriptions of 30-days while requiring refills of maintenance drugs 

through mail order. VAshould implement a process that complies with Veterans 

Choice and ensures immediate access to needed medication without overburdening the beneficiary. 

6. Reforming the Role of the VA Office of the Inspector General in Contracting 

The VAOIGplays a crucial role in detecting waste, fraud, abuse within the VA and 

is essential to protecting the interests of veterans in the VA’s care. However, the 

OIG’s role in contracting is overly expansive, which, ultimately, leads to significant 

delays. Veterans may wait months in order to receive innovative products and pharmaceuticals. This is particularly true in the case of mandatory pre-award audits, 

which often must be repeated. GSA, which administers the Schedules program, does 

not require pre-award audits. 

Recommendations: 

• Eliminate the OIG’s pre-award and post-award audit functions for the 

VAFederal Supply Schedules (FSS). The administrative and pricing review 

functions can be completed by the contracting officer. The OIG should focus its 

efforts on investigating cases of suspected fraud related to the VAsupply chain. 

Additionally, this would eliminate any potential conflicts of interest. 

• Transfer pricing support staff to the National Acquisition Center (NAC). Members report that contract award and modification times at the NACare at an alltime high-preventing veterans from accessing new and innovative products and 

discouraging veteran-owned companies from participating in the FSS. Transferring these staff to the NACand removing the OIG’s audits function will significantly speed up the process 

Attachment 2 

The Core Issue: VHA needs a Clinically Led and Managed VHA Program Office 

Background: 

• Medical devices are highly regulated and frequently very complex devices, 

which lead to specific medical outcomes in the hands of the surgeon or clinicians 

and often have variations in cost of use. Commercial hospital systems recognize 

these complexities, and create oversight organizations that are permanently 

staffed with individuals with both clinical and medical supply chain expertise 

to evaluate medical devices and make product decisions that result in optimal 

outcomes and best value for their patients and clinicians across their hospital 

system 

• Industry supports and encourages VHA to follow the commercial models which 

represents 98–99% of the US market vs 1–2% for VHA, and make enterprise 

level decisions through their Program Office for medical devices to improve efficiencies for both VA and industry, however the overwhelming concern of the 

medical device industry as well as VAMCs is that the VHA Program Office is 

neither clinically led nor staffed with experienced medical supply professionals. 

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It is roughly the equivalent of trying to fly an airplane with individuals who 

are not pilots 

Problems that the current VHA Program Office creates: 

• The absence of relevant expertise to lead the program has led to many challenging issues: 

• The NG–MSPV program was created without proper leadership from VHA, and 

instead was created by individuals unfamiliar with medical devices. It has been 

recognized as a total failure and costly to VA. Examples include: 

• Naive to sheer size and effort of task: VHA did not recognize the level of complexity and the challenge of competing requirements for a med-surg PV catalog. 

A process that a commercial organization (like the GPO Premier) with all the 

key experienced clinical staff in place, would take four years to execute, was approached by VHA to complete in only a few months 

• Poor procurement strategy by VHA: VHA Program Office was unfamiliar with 

established medical product categories, and elected to compete individual line 

items rather than recognized product category suites, resulting in significant 

product suite gaps and confusing product mixes that did not meet the needs of 

VHA clinicians. When VHA later attempted to create product categories, they 

developed ones that were hospital departments (Exam Rooms, OR Supplies, 

Central Supplies, etc) rather than product categories industry would recognize 

and respond to 

• Unrealistic goal to restrict medical products to only highest volume products: 

VHA decided to severely restrict the number of lines on formulary that did not 

adequately support clinical care, eliminating critical product sizes needed by clinicians 

• Low price approach: VA used a single award based on lowest price for most of 

the MSPV awards, resulting in products that were not acceptable to clinical 

users and also awards that did not take into consideration other factors such 

as: 

• Award for medical disposables that were lowest price but did not function with 

existing medical equipment at VAMCs 

• Award for medical disposables that did not factor that VAMCs would incur additional costs as other disposable products would need to be used with the 

awarded product, resulting in higher cost in use for VA 

• Award for medical product that did not factor total costs to VAMCs, such as 

construction costs for the change 

• Lack basic understanding of medical supply chain: VHA was unaware of very 

basic medical supply chain structure that while many medical products are 

available through med-surg distributors, there is a significant number of medical devices that are only available direct from manufacturers, which led to VA 

SAC spending significant contracting time, dollars, and effort to create solicitations for the direct only products that manufacturers would not respond to as 

it was inconsistent with the commercial model. VA also created unrealistic goals 

for procurement through MSPV based on this lack of knowledge that VAMCs 

could never meet 

• Confused by medical products: Many solicitations were posted that reflected 

that medical products confuse VHA, such as an ENT catheters posted in a Urology Supply solicitation. 

Negative Impact to VA and Industry 

• VHA clinician satisfaction: Clinicians at VAMCs are very unhappy with current 

product availability and access, as it impacts the ability to perform medical procedures, often resulting in cancellations, and also consumes valuable VHA nursing time trying to find and source products. This impacts veteran access and 

satisfaction with VA Medical Centers, and physician/nurse retention 

• VAMCs opinion of the VHA Program Office and their decisions is very low: 

VAMCs are very aware and vocal that the VHA Program Office lacks the clinical and medical supply chain experience, which they view as being less than 

exists at their own VAMCs, and consequently ignore many of the decisions from 

Program Office as it fails to meet their needs 

• Purchase card use: VAMCs are using government purchase cards at an increasing rate as needed products are no longer available from the MSPV, increasing 

costs but also increasing the very real risk of gray market and/or counterfeit 

medical device purchases outside of the secure medical supply chain (MSPV), 

and ongoing problem for VHA for a number of years 

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• Industry opinion of VHA: Industry is experiencing ‘‘bid fatigue’’, and has occurred significant costs in trying to respond to solicitations that are poorly developed and then cancelled. Industry extremely concerned about lack of resolve 

from VHA leadership to correct and lead the program 

The Solution 

• Create an Effective VHA Program Office: An effective VHA Program Office 

would be staffed in similar fashion to other federal agencies that manage medical products: have a clinical leader and clinical staff, mixed with experienced 

medical supply chain professionals, and preferably all these individuals would 

have experience working within the VA system and have knowledge of the 

unique processes. Models to replicate would be DHA MedLog, which is the medsurg equivalent for DoD and is led by a critical care nurse, and staffed with 

seasoned medical logisticians and nurses who have actually worked in Military 

Treatment Facilities. The VA PBM is a good VA example of what a program 

office should look like, led by a pharmacist and staffed with clinicians who have 

experience working in VAMCs. Common elements of a good federal medical program office: 

• Leader is a clinician (RN, pharmacist, or MD) who has also worked in a VA/ 

DoD medical center and familiar with VA/DoD medical supply chains 

• Staffed full-time with other clinicians and medical supply chain professionals 

(logisticians), who have also worked in a VA/DoD medical center 

• VHA needs to create career paths for medical supply professionals to insure 

VHA has a bench of qualified individuals to work at the national Program Office level, similar to how DoD develops medical supply professionals 

Attachment 3 

August 8, 2017 

Phil Christy 

Acting Executive Director, Office of 

Acquisition Operations 

Department of Veterans Affairs 

810 Vermont Ave NW 

Washington, DC 20420 

Subject: Solicitation for MSPV- Next Generation 

Dear Mr. Christy, 

The Coalition for Government Procurement appreciates the Strategic Acquisition 

Center (SAC) publication of draft solicitations for the Next Generation Medical/Surgical Prime Vendor (MPSV) program and the opportunity for industry to provide 

feedback in response. We would like to submit the following comments on the MSPV 

solicitations on behalf of our member companies. 

The Coalition for Government Procurement (The Coalition) is a non-profit association of firms selling commercial services and products to the Federal Government. 

Our members collectively account for more than $145 billion dollars of the sales generated through government contracts including the GSA Multiple Award Schedules 

(MAS) program, VA Federal Supply Schedule (FSS), the Government-wide Acquisition Contracts (GWAC), and agency-specific multiple award contracts (MAC). Coalition members include small, medium, and large business concerns that provide more 

than $12 billion worth of pharmaceuticals and medical/surgical products to support 

health care needs of our nation’s warfighter and veterans. The Coalition is proud 

to have worked with Government officials for more than 38 years towards the mutual goals of common sense acquisition and support for our veterans. 

Based on our member companies extensive experience with medical device supply 

chains in both the government and commercial sectors, and also consistent with 

feedback member companies have heard from VA Medical Centers, many believe the 

current MSPV–NG program formulary is being driven through a process that may 

actually result in significantly less use of the MSPV. Rather than the VA developing 

a program designed to meet the clinical end-users needs which creates efficiencies 

and reduces VA system costs, the NG–MSPV program is being driven by government contracting goals that do not reflect the reality of effectively managing medical 

devices. Our concerns include the following: 

• Lowest price technically acceptable (LPTA) source selection 

• A lack of consistent and effective clinician input 

• Risks associated with grey market items 

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We appreciate your attention to these matters impacting the efficiency and effectiveness of the medical and surgical supply chain and the quality of health care for 

veterans. 

Lowest Price Technically Acceptable Source Selection 

The MSPV program seeks to deliver a national strategic sourcing solution that 

combines a formulary approach with electronic cataloging and ordering to support 

the Veterans Administration Medical Centers. The program relies on four Prime 

Vendor Contracts and supporting Indefinite Delivery-Indefinite Quantity (IDIQ) contracts with suppliers. Additionally, Section E.14 of the Request for Proposals (RFP) 

notes that the contract award for the IDIQ’s will be determined in accordance with 

FAR 15.101–2, LPTA Source Selection Process. LPTA source selection procedures 

are being used in the RFP’s for Patient Care Products, Urology, Respiratory Products, Medical Imaging Products, and many other hospital department level 

groupings. 

Given the nature of these procurements, a LPTA source selection raises significant concerns. LPTA source selections are most effective in situations where unsuccessful contractor performance is minimal and where there is little value or need 

to pay for higher performance. Those criteria are not met in this situation. The SAC 

is procuring products that will be used in the care and treatment of our Nation’s 

veterans-these are situations where the quality of the products is integral to the 

health care outcomes for our veterans. As such, an LPTA source selection is inappropriate. Further, products within these categories may be complex devices with 

unique features that differentiate them from a clinical perspective, or that reduce 

overall cost of care, making comparative clinical and cost effectiveness a more appropriate standard. 

Section E.14 of the RFP’s for Patient Care Products, Urology, Respiratory Products, and Medical Imaging Products also directs offerors to provide tiered pricing information based on unit volume. Additionally, offerors may be subject to a Unit of 

Measure adjustment (calculated at 4.4%) based on the Unit of Issue. This pricing 

approach ignores commercial practices where vendors usually sell products as packages or cases, rather than individual units. 

We recommend that the VA reconsider its use of LPTA selection criteria for these 

and future MSPV solicitations, and instead focus on a program that is based on best 

value decisions with clinician input. 

Clinician Input in the MSPV 

Coalition members remain concerned about the level of clinician input in the 

MSPV program. There have been several issues which seem to be contract-driven, 

rather than clinician-driven. 

The practice of awarding by line item rather than the standard commercial practice of awarding contracts by a coordinated suite of products 1) leads to inefficiencies 

with VA and industry contracting, 2) challenges industry with the basic recognition 

of the solicitations as individual product codes are buried in unfamiliar groupings, 

and most important, 3) concerns for the practice of medical care by end-users. 

Awarding different medical products within a suite of products may require additional training for VA medical staff for each product code to ensure appropriate use, 

increasing time on already stressed medical staff and potentially increasing safety 

risks by increasing variation. Robust clinical oversight during the requirements development would correct this issue and be aligned with the best practice of contracting by a coordinated suite of products. 

Many products that are proprietary were posted under the Brand Name or Equal 

solicitations, even though there are no equivalents. These will include a number of 

products that are disposable components for capital equipment located at VAMCs, 

and using other disposables will typically not work with that equipment, may invalidate the equipment warrantee, or could cause patient harm. We believe that these 

items, if there was robust clinical input, would have been place in the Brand Name 

Only designation. 

Additionally, products are being placed under improper categories. For example, 

a Coalition member identified an ear, nose, and throat product was posted under 

the urology category. Although this issue has been rectified, the Coalition remains 

concerned that the products and categories of the contract are not properly aligned. 

Duplicate product codes are also being uncovered in totally different solicitations 

(example: same product code listed in Medical Imaging and also in OR Supplies). 

This would be resolved if contracted by coordinated suites and product categories, 

rather than line item by hospital department. 

We recommend that the SAC immediately incorporate clinician input into their 

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ence. A model that the SAC could emulate is the Department of Defense (DoD) 

pharmaceutical formulary process (see 31 CFR a 199.21). The DoD Pharmacy and 

Therapeutics Committee assures that the selection of agents for the formulary is 

based on broadly representative professional expertise concerning clinical and cost 

effectiveness of products within the pharmaceutical agent class. The Committee’s 

decisions and minutes are posted publicly, and industry is given the chance to provide their input and feedback to the Committee. This process ensures sufficient clinical input for the DoD formulary in assessing clinical differentiators and cost tradeoffs as well as identifying errors in category assignments. There should be a permanent organization in the VA responsible for ensuring clinician input, which is crucial 

to the MSPV’s success. 

Grey Market Items 

The Coalition supports the SAC’s efforts to prohibit grey market items from being 

sold through the MSPV–NG via unauthorized resellers. The MSPV solicitations include a definition of grey market goods that we recommend be modified consistent 

with commercial practice. Section B of the solicitation defines a grey market good 

as, ‘‘genuine branded goods sold outside of an authorized sales-territory (or by nonauthorized dealers in an authorized territory) at prices lower than being charged in 

authorized sales territories [emphasis added] (or by authorized dealers).’’ Instead, 

we recommend the following: 

The Contractor shall provide only new equipment and new parts for the required 

products described herein. ABSOLUTELY NO ‘‘GREY MARKET GOODS’’ shall be 

provided under any Delivery Order. Grey Market Goods are defined as genuine 

branded goods sold outside of the manufacturer’s authorized. Grey market goods purchased from unauthorized sources have left the authorized supply chain and may not 

be stored in conditions that meet the manufacturer’s specifications, and medical devices could be counterfeit or adulterated which pose a threat to patient safety. Grey 

market items will typically invalidate a manufacturer’s warranty. All Equipment 

must be covered by the manufacturer’s warranty. 

We recommend that the ‘‘grey market good’’ definition be modified to remove the 

reference to price and to provide some rationale as to why grey market items are 

prohibited for delivery orders. Grey market items may have a lower price or a higher price than the price of items sold within the authorized medical supply chain. 

Unauthorized resellers could purchase the product from an authorized distributor 

and then resell to the government at a higher price. The price of an item does not 

relate to whether it is a grey market good or not. The revised ‘‘grey market goods’’ 

definition above also emphasizes the risk to patient safety of purchasing outside of 

an authorized distributor network and potential invalidation of the manufacturer’s 

warranty. 

In summary, the Coalition recommends that the SAC: 

1)Reconsider use of LPTA source selection criteria for the MPSV RFP’s. Instead 

we recommend a program based on best value decisions and clinician input. 

2)Incorporate more clinician review into the MSPV RFP’s. The Coalition has identified several aspects of the RFP’s including the unit of measure adjustment and the 

groups that may not be supported by clinicians. 

3)Host a meeting between the SAC, VHA, and industry, so that stakeholders can 

discuss the process for clinician input and identify solutions. 

4)Create a permanent office that is responsible for delivering clinician input. This 

process could be modeled on DoD’s pharmaceutical formulary process. 

5)Revise the definition of grey market items as proposed. 

Thank you for considering the Coalition’s comments concerning the Next Generation MSPV. If there are any questions, please contact me at (202) 331–0975 or 

rwaldron@thecgp.org. 

Sincerely, 

Roger Waldron 

President 

Attachment 4 

November 9, 2017 

Brian C. Love 

Contracting Officer, MSPV 2.0 

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Strategic Acquisition Center (SAC) 

Department of Veterans Affairs 

10300 Spotsylvania Ave, Suite 400 

Fredericksburg, VA 22408 

Dear Mr. Love, 

The Coalition for Government Procurement appreciates the opportunity to respond to the Department of Veteran Affairs (VA) October 19, 2017, Request for Information and Statement of Objectives (SOO) seeking information about the capability, capacity, and viability of US businesses that provide product supply chain 

end-to-end management. VA is considering options for the next iteration of its current Prime Vendor program for medical surgical supplies and equipment. 

The Coalition for Government Procurement (The Coalition) is a non-profit association of firms selling commercial services and products to the Federal Government. 

Our members collectively account for more than $145 billion dollars of the sales generated through government contracts including the GSA Multiple Award Schedules 

(MAS) program, VA Federal Supply Schedule (FSS), the Government-wide Acquisition Contracts (GWAC), and agency-specific multiple award contracts (MAC). Coalition members include small, medium, and large business concerns that provide more 

than $12 billion worth of pharmaceuticals and medical/surgical products to support 

health care needs of our nation’s warfighters and veterans. The Coalition is proud 

to have worked with Government officials for more than 38 years towards the mutual goals of common sense acquisition and support for our veterans. 

VA would like to improve the quality, effectiveness and efficiency of its medical/ 

surgical prime vendor program by using best commercial practices and technology. 

To achieve these objectives, the Department is examining the possibility of a single 

contractor that would provide VA worldwide, a turn- key solution, for a one-stopshop acquisition platform for medical supplies, equipment, and related products. As 

we read the notice, VA is anticipating that the potential contractor would: 

A.Determine what the agency would buy 

i.’’.be responsible for developing a medical surgical supply and equipment formulary for each facility in VA .’’ 

B.Acquire the items 

i.’’.provide strategic sourcing...’’ 

C.Manage and distribute the items 

i.’’ .life cycle management, distribution, inventory management.’’ 

D.Administer contracts and assure quality control 

i.’’.analysis services, quality control/quality assurance support services, warranty 

management services, and 

E.Provide for electronic ordering, invoicing, and real-time status. 

These services would be provided using an e-commerce platform that incorporates 

best business practices. 

Coalition members support VA’s objectives related to aligning the acquisition of 

medical/surgical products more with commercial best practices and increased efficiency. Before, however, we can realistically assess MSPV 2.0, there are a number 

of important questions that VA must address. Those questions are set forth below. 

Without answers to these questions, Coalition members are concerned that VA’s vision could negatively impact the ability of government suppliers to adequately respond to the health care needs of veterans. The Coalition values opportunities for 

continued discussion with VA on these questions. 

1. Is the MSPV 2.0 vision based on a viable commercial model? 

Despite the expansive involvement of our member companies in the market for 

commercial items, our members question whether there is an existing commercial 

provider that can deliver the extensive scope of services described in the FBO notice 

for medical supplies and equipment. 

VA’s current prime vendor program supports more than 9 million veterans. An 

initiative that moves to a new, commercially untested e-commerce platform should 

be undertaken only in increments, after a series of periodic evaluations, over a period to time. To do otherwise risks failing the health care needs of veterans. 

Prior to launching MSPV 2.0, the Coalition recommends that the SAC: 

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a.Identify through what channels the medical and surgical products considered for 

the program are purchased in the commercial market (recognizing that they are 

bought through different pathways, not just one) 

b.Align the VA’s purchasing strategy with these commercial practices 

c.Coordinate with the program offices that are already contracting for these products, ensuring that there is no duplication of effort 

We also recommend that the VA consider following the VHA’s pharmacy/prosthetics/logistics working group as a model, which determines the responsibility and 

management for specific products. A MSPV/equipment/direct working group could be 

established to coordinate the efforts between the responsible program offices. 

2. Does the Veterans Health Administration (VHA) have a clinically led and 

managed program office that will determine which products will be acquired through MSPV 2.0? 

Coalition members note particularly that there is a lack of clinician involvement 

in determining what products are included on the current MSPV–NG formulary and 

how such products are sourced. To date, VHA has not taken responsibility for its 

medical supply chain by establishing a clinician led and managed MSPV program 

office. Under the proposed model, how would the VA ensure that the prime vendor 

has the appropriate clinical staff to make formulary decisions that prioritize patient 

outcomes? How would the VA ensure that formulary items are NOT being selected 

by business people based on business decisions? 

The Coalition is concerned that under the current proposal, financial incentives 

rather than a focus on patient outcomes will drive the program. There is also concern that without the program being led and managed by clinicians at VHA, many 

of the same challenges with the current MSPV program will continue into the next 

iteration. 

3. Should ‘‘medical equipment’’ items be excluded from the formulary 

given that, commercially, they are sold direct from manufacturers and not 

through distributors? 

VA mentions that medical equipment items will be included in the Formulary. 

These types of products are typically purchased direct from manufacturers and not 

sold through distributors in the commercial market. Many equipment items such as 

Ventilators have various software options and accessories that are purchased with 

the equipment in a customized manner. Meaning that each particular end user customer could ask for a unique configuration of software options and accessory items. 

In addition, the VA has a Non-Expendable Medical Equipment program that would 

seem to conflict with including equipment items in a MSPV formulary. 

4. Are some of the functions contemplated for the contract, inherently 

governmental? 

The United States has been the long-standing policy that inherently governmental 

functions shall not be performed by a contractor. FAR 7.5 lists examples of functions 

that have been considered as inherently governmental. Those examples include 

processes that VA appears to contemplate contracting out, specifically: 

• Determining what supplies or services are to be acquired by the Government 

• Approving any contractual documents, to include documents defining requirements, incentive plans, and evaluation criteria 

• Awarding contracts 

• Administering contracts 

• Determining whether contract costs are reasonable, allocable, and allowable 

VA should examine its proposal and statement of objectives to assure that it will 

not outsource inherently government functions to a contractor. 

5. Does the VA proposal establish an organizational conflict of interest that 

cannot be mitigated? 

FAR 9.502 states that ‘‘[a]n organizational conflict of interest may result when 

factors create an actual or potential conflict of interest on an instant contract, or 

when the nature of the work to be performed on the instant contract creates an actual or potential conflict of interest on a future acquisition’. 

The vision for MSPV 2.0 assigns one entity responsibility for decisions on what 

to buy, how to buy and contract administration. As described, the entity has total 

control over the system without any readily discernible checks. What prevents for 

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example, a contractor from selecting products for formulary based on its commercial 

relationships? 

The MSPV 2.0 approach presumes that further consolidation of the MSPV program is desirable. There is some thought that this approach is flawed. There is 

value to competition. Distribution is a commercial activity and there are many competent players at a regional or sub-regional level. Rather than leverage that competition, VA’s MSPV 2.0 vision cedes disproportionate market power to one firm. If 

that contractor has difficulty performing, it would be very difficult to terminate and 

bring in a new provider. Fewer choices is not in the interest of the VA facilities. 

Over time, vesting too much authority into a single contractor is not good for government or its supplier base. The downside of consolidating that much authority 

into one entity is that it enables the contractor to control not only the federal market, but also to leverage federal suppliers in ways that may be detrimental. Will 

bargaining power between the suppliers and prime vendor be so distorted that the 

prime vendor will be able to influence not only federal but commercial business? For 

example, will the supplier fees be consistent with the 3% rate in the commercial 

market for medical devices? 

6. Will MSPV 2.0 address compliance with underlying procurement policy? 

The SOO does not offer guidance as to how fundamental procurement policies will 

be addressed. For example, must suppliers comply with the requirements of the 

Trade Agreement and Buy American Acts and who will determine compliance? Must 

prices be determined fair and reasonable and if so who will do so - VA or the Prime 

vendor? Will the small business ‘‘Rule of Two’’ be adequately considered? 

Would it be the PV’s responsibility to comply and how would they do so? 

7. How will disputes between suppliers and the prime vendor be resolved? 

Our members are concerned that conflict of interest concerns may drive disputes 

with the prime vendor both in selecting items for formulary and handling future orders. Will a supplier have any ability to challenge these issues or others arising in 

the acquisition process? 

Is the agreement between the supplier and prime vendor a federal or a commercial contract? Does VA envision such matters to be totally between the commercial 

parties or will the Government have a role? 

8. Does the e-commerce platform adequately protect government and contractor data? 

The draft SOO includes a requirement for a metrics dashboard and the ability to 

provide analytics to assess performance, supply chain costs, and forecast market expectations. Who would own the data generated in the electronic system? Will the 

prime vendor be required to provide sales tracings to suppliers consistent with commercial practices for medical devices? How will this data be protected? 

Is the contractor able to also sell product through the program? Can they use/access this data to gain an unfair advantage in the government or commercial marketplace? 

9. Is a ‘‘requirements’’ type contract appropriate in this instance? 

The SOO (section 5.2.1) states the government intends to issue a single requirements contract using FAR parts 15 and 16. A requirements contract would obligate 

VA to filling all actual purchase requirements of the government during a specified 

contract period from one contractor. VA estimates that there will be 86.4 million patient care events in 2018. Given the broad scope of potential users of this acquisition 

platform, it would seem very difficult for VA to adequately police it users to ensure 

all orders go to the contractor. ‘‘Leakage’’ from the contract could result in significant liability to the government. 

10. Has VA considered the impact of its cost objectives on innovation? 

A significant objective for the MSPV 2.0 is cost savings. How will cost savings be 

measured - lowest price or best value (medical outcomes, supply chain efficiencies, 

etc.)? Will the contractor or government be responsible for measuring such savings? 

There is a potential for the contractor to limit innovation because the innovative 

product may be more expensive than current technology. Without sufficient clinician 

input, what incentive does a contractor have to offer more expensive new technology? 

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11. What does the goal of a 95% usage rate for the ‘‘one-stop-shop’’ acquisition of consumable medical and related commodities described in 5.1.1 

mean? 

VA has a goal for 95% of medical disposables to come through MSPV program. 

This goal may be unrealistic depending on what medical products are considered 

within scope, as a significant portion of these products are available commercially 

only directly from manufacturers. It is unlikely that those manufacturers are going 

to change their commercial models for a customer that only represents 1–2% of US 

sales. 

12. Would the VA consider establishing separate contracts for direct only 

products? 

Again, the draft SOO states that there would be a 95% usage goal for the acquisition of consumable medical and related commodities. Much of this industry is direct 

only. It is not cost effective or efficient to stock them through distributors. VA 

should follow commercial model of establishing separate contracts. VA could use an 

Electronic Medical Catalogue (ECAT) like that used by the Department of Defense 

to facilitate ordering. 

13. What will be the drop shipping policy under MSVP 2.0? 

Will VA align more with the commercial market and establish contracts with 

manufacturers for direct- only products. 

14. Will prosthetics be excluded from MSPV 2.0? 

The variety of products and nature of procedures does not translate to MSPV purchase or delivery infrastructure. Although most cases are templated prior to surgery, the case often requires a change on the spot. As such, multiple sizes and types 

are made available to the surgeon during each case. This flexibility cannot be 

achieved by warehousing implants and having a single size/type delivered to the 

hospital on the date of surgery. 

15. The VA SAC would like access to the latest technologies under the formulary. What will the process be to add new products? 

Again, more clarification is needed as to how formulary decisions will be made. 

Members report challenges with the process to add new products under the existing 

MSPV–NG. What criteria will be used by clinicians to determine which products to 

add to ensure that veterans have access to the latest technologies? 

16. The draft SOO proposes a Period of Performance that could extend 12 

to 15 years. What is the rationale for this timeframe? 

A performance period of 12 to 15 years far exceeds FAR limitations. Under FAR 

17.204(e) the total period of base plus options ‘‘shall not exceed 5 years’’ in the case 

of services. For supplies, the base plus option quantities shall not exceed 5 years. 

These limitations do not apply to IT contracts. However, other statutes may further 

limit the contract term. 

The performance period for the Pharmacy Prime Vendor contract is 8 years. Members would like to better understand the SAC’s rationale for a potential performance 

period of 12 to 15 years for MSPV 2.0. 

17. Would the VA further explain Performance Objective 5.1.6, which states, 

‘‘Allow maximum physician choice in consumable medical commodities, 

consistent with patient safety and enterprise-wide interoperability and 

standardization goals, used while maximizing cost saving possibilities?’’ 

Based on this statement, it appears that the VA program office and/or contracting 

personnel may view many technical medical devices as being commodities without 

recognizing the differences in brands that can impact patient outcomes. In addition, 

allowing maximum physician choice and having standardization goals appear to be 

two completely different initiatives. Further clarification on these points would be 

helpful. 

18. What are the implications of section 6.4 of the SOO that states, ‘‘Only 

FDA approved Medical/surgical supplies that are compliant with Global 

Standard 1 (GS1), Health Industry Business Communications Council 

(HIBCC), and/or International Society for Blood Transfusion (ISBT) 28 

standards will be available to VHA facilities through the MSPV program?’’ 

It is unclear whether the VA intends to exclude products from the formulary that 

do not meet these criteria/standards. 

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Again, the Coalition for Government Procurement sincerely appreciates the SAC’s 

efforts to collect industry’s input on the proposed next generation of the Prime Vendor program. We support better aligning the program with commercial best practices and ensuring that it is led and managed by clinicians at the Veterans Health 

Administration. Significant progress in achieving both objectives will result in more 

efficiencies and cost savings in the delivery of best value medical and surgical supplies to VA facilities worldwide. 

Thank you for considering industry’s input in designing MSPV 2.0. We look forward to working with the VA as it continues to explore options for building the next 

iteration of the Prime Vendor program. 

Sincerely, 

Roger Waldron 

President 

f 

Statements For The Record 

ADVAMED 

AdvaMed is the leading trade association representing medical technology manufacturers and suppliers that operate in the United States. Our members range from 

the largest to the smallest medical technology innovators and companies. Collectively, we are committed to ensuring patient access to life-saving and life-enhancing 

devices and other advanced medical technologies. 

The sacrifice our nation’s veterans and their families make on our behalf cannot 

be understated. We all have an obligation to ensure they receive the highest quality 

care and have access to the best medical technology available. In particular, 

AdvaMed and its member companies believe strongly in our collective relationship 

with the U.S. Department of Veterans’ Affairs (VA) and share the Department’s goal 

of providing our veterans with the highest quality health care possible. 

There are approximately 8 million U.S. veterans of the armed services accessing 

the VA health care system, with another nearly 2.3 million currently serving in the 

military on active duty that may do so in the future. These Americans can experience unique health care challenges, both in terms of battlefield injuries and the 

after-effects of their time spent in service. Through earlier diagnosis and intervention, less invasive procedures and more effective treatments, medical technology is 

revolutionizing health care across the continuum of service and enhancing the lives 

of America’s troops in the field and beyond. Technologies include: spinal cord stimulation; joint/limb replacements; wound care products; neurological devices; cardiac 

technologies; and many others. Through these technologies, our companies can help 

provide the standard of care reflective of the respect and commitment we owe to our 

nation’s veterans. 

However, recent changes in the VA’s procurement of these critical medical technologies have created new barriers within the veteran health care system. The transition from the VA’s National Acquisition Center (NAC) procurement process to a 

new national procurement system for medical devices through the Strategic Acquisition Center (SAC), along with the pre-authorization for certain surgical implants, 

has resulted in significant inefficiencies in veterans obtaining access to care, a reduction in the quality of health care accessible to veterans, and risks pushing high 

caliber providers and suppliers of innovative products out of the VA system. 

We believe that the VA’s effort to reduce catalog items from 475,000 items is appropriate. However, the lack of clinicians in all aspects of this reform and the award 

process is problematic because it threatens the quality of patients care and also restricts the VA’s ability to retain and recruit high quality health care providers. The 

benefit of providing choice with complex medical-surgical products will improve outcomes. Many VA physicians and providers also practice at the 107 affiliated academic health systems and/or the private sector. Clinicians should have access to a 

responsible number of highly technical tools available to them at a teaching hospital/private facility in the morning as well as at the VA facility down the street 

in the afternoon. More broadly, the product catalog should be determined according 

to a thoughtful and detailed process and not simply reduced to meet a ‘‘savings’’ goal 

independent of any patient outcome consideration. 

While the VA has engaged with industry to break down these barriers as they 

arise, the approaches taken do not consistently result in positive outcomes or solutions. Concerns remain, including: 

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• The absence of a dedicated, clinically-led and -managed program office for device procurement at the VA has resulted in a significant void in clinical understanding in the contracting process. This gap in expertise means decisions are 

made without a basic understanding of the medical supply chain and often on 

a bottom-dollar basis without thoughtful consideration of provider and patient 

need. 

• The Next Generation - Medical Surgery Prime Vendor (NG–MSPV) distribution 

program has reduced access to the vast majority of medical products currently 

available while also adding additional costs to the system. 

• The overall experience with the migration to this new system is confusing, burdensome and inconsistent with historical contract management practices and efficient medical care. 

• The VA is assigning contracts and making procurement decisions based solely 

on price rather than measuring value as defined by patient outcomes. There is 

also little to no clinician input. 

• The pre-authorization process for certain technologies (such as surgical implants like stents, total joints, spine implants, pacemakers, and others) is increasing the backlog and amount of unpaid purchase orders, creating challenges 

for vendors who are trying to support VA health care. More critically, these payment delays have impacted veteran access to care, with delayed procedures and 

inadequate supplies. 

• The NG–MSPV program lacks a mechanism for the timely consideration and 

addition of new technologies to the program. 

The overarching concern is that, collectively, these problems have restricted veterans’ timely access to critical technologies and quality care, as well as impacted the 

ability of the VA to attract and retain medical professionals. The Commission on 

Care, established under the Veterans Access, Choice, and Accountability Act of 

2014, raised many of these same concerns in its July 2016 report. In particular, the 

Commission noted that the Veterans Health Administration’s (VHA’s) supply chain 

for clinical supplies, medical devices, and related services is: 

‘‘inadequate compared to.best practices in leading hospital systems. Its contracting 

processes are bureaucratic and slow, which can delay veterans’ access to care. Purchasing processes are cumbersome, which has driven VHA staff to work arounds.’’ 

The recently released Statement of Objectives (SOO) for MSPV version 2.0 appears to outsource the management of the program to a single commercial contractor and shifts significant responsibility from the VA to this contractor. While we 

applaud the VA for seeking to increase commercial practices, we question whether 

there is a commercial entity that has the extensive medical background to perform 

the expansive responsibilities, including: determining what items would be on the 

formulary; administering the contracts between it and the manufacturers; managing 

the procurement process; and distributing the actual medical supplies. It is unclear 

if such a model exists or who can provide such a service. 

Our companies strongly encourage the VHA to follow best practice commercial 

models and make enterprise level decisions through a program office for medical devices, which will improve efficiencies for both the VA and industry. The overwhelming concern of the medical device industry as well as the VA medical centers 

is that the VHA Program Office is neither clinically led nor staffed with experienced 

medical supply professionals. It is roughly the equivalent of trying to fly an airplane 

with individuals who are not pilots. 

An effective VHA Program Office would be staffed in similar fashion to other federal agencies that manage medical products: have a clinical leader and clinical staff, 

mixed with experienced medical supply chain professionals, and preferably all these 

individuals would have experience working within the VA system and have knowledge of the unique processes. Models to replicate would be the Defense Health Agency (DHA)’s Medical Logistics (MedLog) division, which is the equivalent operation 

for the Defense Department. DHA MedLog is led by a critical care nurse, and 

staffed with seasoned medical logisticians and nurses who have actually worked in 

military treatment facilities. Within the VA, the VA pharmacy benefit manager 

(PBM) is a good example of what a program office should look like, led by a pharmacist and staffed with clinicians who have experience working in the VHA system. 

Meanwhile, delays in resolving purchase orders and eliminating payment backlogs 

also continue to impact our industry’s ability to serve the VHA and our veterans. 

For current backlogs, the recent move by the VA to initiate a ratification clean-up 

process provided some relief, but problems persist and a precise schedule for completing work to resolve these issues is needed. More importantly, the VA has yet 

to issue any guidance to address future concerns or otherwise demonstrate how the 

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Department will prevent these problems from developing again. Without a real 

prompt pay requirement, such as 30 days from date of procedure, purchase order 

issues will continue to persist. 

We welcome today’s hearing as another opportunity to understand on how the VA, 

Congress, and industry can take a solutions-oriented approach to these issues and 

work together on the most effective resolution. We support efforts to ensure the VA, 

Congress, and industry to work together to review and seek ways to better implement processes and to ensure that all procurement policies evaluate technologies 

based on the value to patients. Ultimately, the most important measure of the success of the VA’s new procurement policies is whether the veterans that they serve 

are getting access to the best medical care in a cost-effective manner. 

Again, we are grateful for the Committee’s leadership on this issue and appreciate 

the work of Reps. Banks and Peters in particular. Thank you for holding this hearing and we look forward to continuing to work with Congress and the VA to provide 

access to high-quality, cost effective medical technology that meets the needs of our 

nation’s veterans. 

f 

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Material Submitted For The Record 

GAO Power Point Chart 

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