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[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

 
STRUCTURING THE U.S. DEPARTMENT OF VETERANS AFFAIRS OF THE 21ST CENTURY
=======================================================================

                                HEARING

                               before the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 10, 2010

                               __________

                           Serial No. 111-66

                               __________

       Printed for the use of the Committee on Veterans' Affairs

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57-010                    WASHINGTON : 2010
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                     COMMITTEE ON VETERANS' AFFAIRS

                    BOB FILNER, California, Chairman

CORRINE BROWN, Florida               STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas                 CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine            JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South     HENRY E. BROWN, Jr., South 
Dakota                               Carolina
HARRY E. MITCHELL, Arizona           JEFF MILLER, Florida
JOHN J. HALL, New York               JOHN BOOZMAN, Arkansas
DEBORAH L. HALVORSON, Illinois       BRIAN P. BILBRAY, California
THOMAS S.P. PERRIELLO, Virginia      DOUG LAMBORN, Colorado
HARRY TEAGUE, New Mexico             GUS M. BILIRAKIS, Florida
CIRO D. RODRIGUEZ, Texas             VERN BUCHANAN, Florida
JOE DONNELLY, Indiana                DAVID P. ROE, Tennessee
JERRY McNERNEY, California
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota
JOHN H. ADLER, New Jersey
ANN KIRKPATRICK, Arizona
GLENN C. NYE, Virginia

                   Malcom A. Shorter, 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.

                            C O N T E N T S

                               __________

                             March 10, 2010

                                                                   Page
Structuring the U.S. Department of Veterans Affairs of the 21st 
  Century........................................................     1

                           OPENING STATEMENTS

Chairman Bob Filner..............................................     1
    Prepared statement of Chairman Filner........................    22
Hon. Harry E. Mitchell, prepared statement of....................    22

                               WITNESSES

U.S. Department of Veterans Affairs, Hon. Eric K. Shinseki, 
  Secretary......................................................     2
    Prepared statement of Secretary Shinseki.....................    23

                   MATERIAL SUBMITTED FOR THE RECORD

``VA to Automate its Agent Orange Claims Process,'' by Gregg 
  Zoroya, USA Today, Updated March 9, 2010.......................    28

STRUCTURING THE U.S. DEPARTMENT OF VETERANS AFFAIRS OF THE 21ST CENTURY

                              ----------                              

                       Wednesday, March 10, 2010

                     U.S. House of Representatives,
                            Committee on Veterans' Affairs,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:37 a.m., in 
Room 334, Cannon House Office Building, Hon. Bob Filner 
[Chairman of the Committee] presiding.
    Present: Representatives Filner, Brown of Florida, Michaud, 
Herseth Sandlin, Halvorson, Rodriguez, Donnelly, McNerney, 
Walz, Adler, Kirkpatrick, Buyer, Stearns, Brown of South 
Carolina, Boozman, Bilbray, Lamborn, and Roe.

              OPENING STATEMENT OF CHAIRMAN FILNER

    The Chairman. Good morning. The Committee on Veterans' 
Affairs hearing on ``Structuring the U.S. Department of 
Veterans Affairs (VA) of the 21st Century'' will come to order.
    I want to thank the Members of the Committee and, of 
course, the Secretary of the Department of Veterans Affairs, 
General Shinseki, for being with us.
    We all know that the VA is the second largest agency in the 
Federal Government. With about a quarter of a million 
employees, the VA oversees the largest integrated health care 
system in the country along with a vast array of benefit 
programs to compensate the service and sacrifice of our 25 
million veterans.
    Reforming the VA and bringing it into a 21st Century 
organization is a monumental task and one that our Secretary 
has not shied away from.
    We are here to listen to your comments, Mr. Secretary. We 
want to hear your views on the future of the VA, the challenges 
that face the VA in the future, and what your needs are to 
transform the agency into a 21st Century organization.
    We are not looking at specific bills right now. We want to 
hear about your vision and your assessment of what tools you 
need, including a proposal that you support put forth by 
Secretary Nicholson that would amend title 38 to add an 
additional Assistant Secretary and eight Deputy Assistant 
Secretaries.
    We are not looking, as you have said, for a piecemeal 
approach, but we want to look at a comprehensive program.
    We look forward to the hearing with you and we are going to 
work together in a bipartisan way to act on your suggestions.
    I recognize Mr. Brown for any comments he may make.
    [The prepared statement of Chairman Filner appears on p. 
22.]
    Mr. Brown of South Carolina. Thank you, Mr. Chairman.
    And, Mr. Secretary and the rest of the panel, we welcome 
you here today and look forward to a great discussion.
    I know we just passed a goodly number of bills that we 
think will help our veterans and particularly those that are 
homeless and unemployed. And we look forward to your testimony.
    The Chairman. Mr. Secretary, you have the floor.

STATEMENT OF HON. ERIC K. SHINSEKI, SECRETARY, U.S. DEPARTMENT 
   OF VETERANS AFFAIRS; ACCOMPANIED BY W. TODD GRAMS, ACTING 
ASSISTANT SECRETARY FOR MANAGEMENT AND CHIEF FINANCIAL OFFICER, 
   U.S. DEPARTMENT OF VETERANS AFFAIRS; JAN R. FRYE, DEPUTY 
 ASSISTANT SECRETARY FOR ACQUISITIONS AND LOGISTICS, OFFICE OF 
 ACQUISITION, LOGISTICS, AND CONSTRUCTION, U.S. DEPARTMENT OF 
   VETERANS AFFAIRS; AND STEPHEN W. WARREN, PRINCIPAL DEPUTY 
   ASSISTANT SECRETARY FOR INFORMATION AND TECHNOLOGY, U.S. 
                 DEPARTMENT OF VETERANS AFFAIRS

    Secretary Shinseki. Chairman Filner, Congressman Brown, 
distinguished Members of the Committee, thank you for this 
opportunity to discuss our desire to restructure the Department 
of Veterans Affairs into a more effective and more efficient 
organization.
    Joining me today here at the witness table, let me begin on 
my left, Mr. Steph Warren, who is our Principal Deputy 
Assistant Secretary for Information and Technology; to my 
immediate left, Todd Grams, our Acting Assistant Secretary for 
Management; and to my right, Mr. Jan Frye, Deputy Assistant 
Secretary for Acquisition and Logistics.
    Mr. Chairman, I provided written testimony to the Committee 
and I ask that it be entered into the record.
    The Chairman. It will be. Thank you, sir.
    Secretary Shinseki. Thank you, sir.
    Our thoughts about redesign seek an organization that is 
going to accomplish several things. First, we want it to be 
capable of agilely leveraging the significant opportunities 
that are provided to the VA in the next two budgets, the 2010 
budget and the 2011 budget, that gives us resources at our 
disposal.
    Second, we want to produce demonstrable returns on 
investments and then, third, we want to improve access, 
quality, safety of our services while still being able to 
control costs involved.
    Let me be clear. Underpinning our intent is a commitment 
never to squander nor diminish the quality of care and benefits 
we provide to veterans. That is our mission.
    You have shared your insights with me both during our 
testimonies and also in our meetings together about changes 
many of you feel are necessary to fulfill President Obama's 
charge to transform this Department into a 21st Century 
organization. And this hearing provides VA an opportunity to 
continue that dialogue.
    The veterans service organizations who are represented here 
today also have insights into some of the challenges that we 
wrestle with every day to raise our effectiveness and 
efficiencies. And I have listened to their comments as well.
    During this Committee's recent budget hearing in February, 
I outlined four strategic goals which have already begun to 
guide our path to the future.
    First, increase access, improve quality, and enhance the 
value of health care benefits and memorial services.
    Second, raise veterans' satisfaction with VA benefits and 
services.
    Third, improve the quality of internal systems to build a 
more competent organization, competency from the top to the 
lowest level of execution inside the organization, no single-
point failures, and last, assure our readiness to protect our 
people and our assets daily and especially during crises.
    Now, during that testimony, I also highlighted six 
performance goals around which we focus our efforts.
    First, automate the GI Bill education benefits. And as I 
reported then, the first set of tools I expect in April, the 
next set in July, the third set in November. And there may be a 
fourth iteration in December. But by the end of this year, we 
will be fully automated in the new GI Bill process.
    The second of those performance goals attack the claims 
backlog. In fact, the language we use is break the back of the 
backlog this year.
    Third, set the conditions culturally for veterans' advocacy 
within VA.
    Next, improve mental health care. Then establish a virtual 
lifetime electronic record, something that President Obama in 
April mandated, and both Secretary Gates and I have that 
charter.
    And then, finally, eliminate veterans' homelessness. So 
these are the six performance goals around which we organize 
ourselves.
    Now, internal management and organizational changes, which 
we have already put into motion, are strengthening the trust 
and confidence of stakeholders in our transformation 
initiatives, some of the feedback that I get as we travel.
    Now, we seek to strengthen VA's management infrastructure 
across all five of our core functions. Those functions are 
common to any large organization like VA. It is acquisition and 
logistics. It is construction and facilities management. It is 
information technology (IT), human resources management, and 
the fifth core function is financial management.
    Of specific importance and interest is our need for 
acquisition reform. Along with the rapid deployment of robust 
and effective IT tools, acquisition reform is equally important 
to fulfilling those strategic goals that I identified.
    We are hard pressed to improve our return on investments 
without an appropriate acquisition management structure, which 
we lack today.
    There is similarity between IT success or failure and 
contracting. The IT setbacks that have tested your patience and 
our confidence have largely been project management and 
acquisition failures. For both IT and acquisitions, past 
weaknesses have stemmed from overly decentralized control, lack 
of enterprise-wide management information, the ability to see 
what we are doing and how we are doing it, and in some cases 
improvised policies.
    Managers in the field lacked supervision, guidance, and 
sustained support, and policies were inconsistently applied. 
And to me, those are my responsibilities to put in place.
    VA is large and diverse enough that having all operational 
IT decisions passing through a single office would slow 
operations, so we balanced centralized policy with 
decentralized execution of those policies to empower our 
employees and, yet, maintain consistency across the 
organization.
    After 3 years of work to centralize IT, we are beginning 
just now to reap intended benefits.
    While they are sufficiently different disciplines requiring 
individualized solutions, the issues we dealt with during IT 
reform are also present in acquisition reform.
    VA's procurement spending, almost $15 billion annually, has 
been highly decentralized, resulting in a lack of 
standardization, accountability, and controls.
    I seek a $2 billion return on acquisition reform and that 
is what we are about.
    To accomplish these savings, we need your authorization to 
proceed with my request for an Assistant Secretary for 
Acquisition, eight DAS positions, Deputy Assistant Secretary 
positions, and the associated authorities included in draft 
legislation, which the Department provided to this Committee.
    Great IT development and execution depend on well-managed, 
disciplined acquisition support and project management. 
Sensible policies and consistency in delivering high-value 
customer services are crucial. The link between IT success or 
failure and contracting is clear, but we have made progress, 
beginning with IT centralization, which was initiated at your 
behest in 2007 and with PMAS, the Program Management 
Accountability System, which was VA's initiative launched last 
year by Assistant Secretary Baker.
    We have more work to do and we seek the support of this 
Committee in order to continue improving, as I said at the 
outset, our effectiveness and our efficiency. We have spent a 
year fundamentally and comprehensively reviewing our mission, 
what it is we are supposed to be doing, and the processes and 
procedures we have in place to control that.
    We have challenged all the assumptions and believe we are 
ready to take this next step. Your support in restructuring 
VA's acquisition and IT programs is much needed. We seek 
Secretary Baker's counterpart in acquisition, logistics, and 
construction, which we do not have.
    Changes to restructure acquisition and IT were included in 
the budget we sent to Congress in the first session of the 
111th Congress. We propose authorizing VA to establish an 
Office of Assistant Secretary for Acquisition, Logistics, and 
Construction, a fundamental step in consolidating the 
acquisition function and elevating it to its central role in 
controlling costs and contracting and acquisitions.
    Going forward, our programs need coherence, intellectual 
rigor, and decisiveness that an Assistant Secretary will 
provide.
    VA only recently, I think you will recall, established its 
Office of Acquisition, Logistics, and Construction, in October 
2008. We have a Director performing that role.
    We need authorization to appoint an Assistant Secretary 
level leader who will direct this office, consolidate 
functions, centralize procurement policies, which are currently 
scattered across and throughout the Department.
    This proposal is not about creating a new layer of 
bureaucracy. It is about streamlining our organization in ways 
that will better align our priorities with the most responsible 
use of VA's funds.
    It is to be implemented within existing resources and it 
will not require an increase in VA SES, Senior Executive 
Service, authorizations.
    Last, I can appreciate some of the frustration on the part 
of Members of this Committee with the pace of change, 
especially regarding some long-standing deficiencies. I have 
read the U.S. Government Accountability Office (GAO) reports. I 
have read the Inspector General (IG) reports. We believe this 
proposal will give us the agility and discipline we seek.
    I intend to consult and share our progress with this 
Committee so that you can monitor the rate of reform with this 
initiative.
    Again, Mr. Chairman, I thank you and the Members of this 
Committee for inviting me here to discuss these issues. And, 
again, I would like to thank you for tremendous support during 
my first year as Secretary of this Department. Your insights 
were generously shared and most helpful. Thank you, and I look 
forward to your questions.
    [The prepared statement of Secretary Shinseki appears on p. 
23.]
    The Chairman. Thank you, Mr. Secretary.
    I am going to be calling on my colleagues after I make just 
two quick comments.
    I believe you saw, while you were waiting, the bills that 
we passed on homelessness. We certainly are strongly committed 
to, and supportive of, your commitment to end veterans' 
homelessness in 5 years. And we thank you----
    Secretary Shinseki. Thank you very much, Mr. Chairman.
    The Chairman [continuing]. For your energy on that. I must 
say that during 18 years I have been sitting here, I have not 
heard a Secretary acknowledge problems, mistakes, or failings 
at the VA, and their responsibility and your accountability for 
improving them. We thank you for your candor and we look 
forward to supporting you.
    Ms. Brown.
    Ms. Brown of Florida. Thank you, Mr. Secretary. And I want 
to thank you for your service and your commitment to continuing 
to serve. And I keep saying that you are really a bright spot 
in the Administration. And I was reading in USA Today about 
your proposal.
    And I want to get that article, Mr. Chairman, and make sure 
everybody gets it. It was an interesting article in yesterday's 
USA Today.
    [The USA Today article, entitled ``VA to Automate its Agent 
Orange Claims Process,'' dated March 9, 2010, appears on p. 
28.]
    But my question comes to as you develop a plan for the 
Veterans Affairs Medical Center in Orlando. I was in Orlando 
and I had three meetings with labor groups. They are concerned 
about agreements that when the VA contracts to do work, to make 
sure there has not been a waiver dealing with Buy America or 
some other reason why they are not able to be more competitive 
as far as getting the opportunity to work on these projects.
    I need a more intensive explanation as to the bid process 
and how we are selecting the contractors for the various VA 
hospitals that we have because they even mentioned the one in 
New Orleans.
    Secretary Shinseki. Congresswoman, I know there is probably 
a longer history than I have on the way contracting is done. 
Part of my effort here is to bring this under control, under 
discipline, but also increase the level of transparency so 
people can see what we do and then make their judgments about 
whether we are fair and we are doing the right things.
    Let me just use as an example, a year ago, we were given by 
the Congress and the Administration $1 billion in recovery 
funds.
    Ms. Brown of Florida. Yes.
    Secretary Shinseki. We took that $1 billion opportunity and 
we competed 98 to 99 percent of that. So it was put out for 
competitive bidding. Of those contracts, over 80 percent went 
to small businesses owned by veterans, which for us is 
important because, as I have said a number of times, we find 
that veterans hire veterans because they are comfortable and 
they know what they are getting.
    This creates churn in the workplace. That means veterans 
are being hired and veteran-owned small businesses have an 
opportunity to compete. It is the fairness factor. It is not a 
disadvantage for anyone else, but it is a fairness factor for 
them.
    And so what I would offer is that model that we use to 
track our contracts, it is an electronic model, is the same 
model we will use and then improve on as we seek the 
opportunity to consolidate contracting in a way that it has not 
been in the past.
    Ms. Brown of Florida. I want to mention minorities, and 
women. You have already indicated that you are doing 
preferences or however we want to frame it today with helping 
veterans get employment and contracts because the VA does quite 
a bit of contracting.
    So thank you.
    Secretary Shinseki. We do have a Veterans First Program at 
VA where we look at contracting opportunities for them, again 
to level the playing field. And then within that, we also track 
the other categories that are important and so that we have 
visibility and others can transparently see our work.
    Ms. Brown of Florida. Thank you again for your service.
    And I yield back, Mr. Chairman.
    The Chairman. Thank you, Ms. Brown.
    I do want to point out, Mr. Secretary, that this Committee 
included in its FY 2011 Views and Estimates that we submitted 
to the Budget Committee, a section that stated that if there 
are additional stimulus jobs bills going forward that we 
recommend almost $1 billion for the VA since there are minor 
and major construction projects ready to go. We hope that if 
there are additional stimulus bills that some of that money 
gets into the VA.
    Secretary Shinseki. Great. Thank you. Thank you very much, 
Mr. Chairman.
    The Chairman. Thank you.
    Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman.
    Mr. Secretary, and it is good to hear your testimony today. 
When addressing the new IT system for the GI Bill, I believe 
you mentioned delivery of phased improvements in July and 
November. I believe at our last oversight hearing, the delivery 
dates were June, September, and December.
    Could you please clarify these dates for us.
    Secretary Shinseki. I will try to. The dates I have are 
April, July, and November. Let me ask Mr. Warren to provide 
some technical----
    Mr. Warren. The dates that we are working to, sir, are the 
end of March, beginning of April the first increment. June is 
the second increment. November is the third. And we delayed it 
a little bit so we did not hit the peak for the fall semester. 
And the full system is deployed by the end of December.
    Secretary Shinseki. Well, I would say that I am probably a 
little bit of the pressure here. I do not know that anything is 
magical about April, July, and November. And so if there is a 
variance in the dates, it is my pressure to say what is the 
best we can do and perhaps that is a little bit of the response 
you are hearing here.
    But, you know, if we can put the July target in May or 
June, because I know what happens in the summer, the crunch 
points are July, August is registration time, if I can get 
those inserted earlier so people can be fully trained, that is 
what I would like to do. And so that is a little bit of my 
pressure.
    But in reality, the date I was provided as sure-fire, no 
fail is a July date. And I am working to see if we can move 
that up.
    Mr. Lamborn. Okay. Thank you for that answer.
    And, Mr. Chairman, I yield back.
    The Chairman. Thank you, Mr. Lamborn.
    Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman.
    I want to thank you, Mr. Secretary, for your testimony this 
morning on how we can better support the VA administratively to 
provide the best care for our veterans.
    In your testimony, you propose to add a new Secretary of 
Acquisition, Logistics, and Construction and eight additional 
Deputy Assistant Secretaries, yet you also indicated the 
proposal would be cost neutral and would not require additional 
budgetary resources.
    What areas in the current VA budget will be providing the 
offset for these new positions and will these funding reduction 
offsets have any detrimental effect to those programs?
    Secretary Shinseki. I am probably here better off providing 
you an answer, a detailed answer for the record. But I do 
intend savings to come out of this. If I am able to convince 
the Committee this is the right way to go. I already indicated 
that my target is $2 billion in terms of contract savings.
    I am already committed. The President has asked all of the 
departments to reduce contract awards in the next 2 years to a 
tune of seven percent over the next 2 years. And for VA, that, 
I think, comes in around $958 million. I have confidence that 
we can improve on that and that is why I have set $2 billion as 
our target.
    These decisions will help me get there. I have said I do 
not foresee a need for any more SES positions and I think this 
is what I can see as cost neutral because of the savings I 
intend.
    Mr. Michaud. Thank you.
    In your testimony, you also say VA's partnership with 
Congress is critical to achieve transformation. Veterans 
benefit from a strong partnership between VA and the Congress, 
which I agree 100 percent with those comments.
    However, sometimes when we actually pass something in law, 
and I agree with what your intention with this new 
administrative change is, but sometimes when we enact something 
into law, the actual implementation is at odds. And I do have a 
concern as far as whether this might slow down the process for 
new clinics or community-based outpatient clinics (CBOCs) that 
are to be built and actually whether the saving is going to be 
there.
    And the reason why I say that, and I am just going to give 
an example because we actually just had a hearing last week in 
the Subcommittee on Health dealing with a law that we passed in 
Congress in 2006, but the implementation is, in my opinion, 
contrary to the law. And it actually deals with reimbursement 
for nursing homes. The law was very clear that the VA will 
provide full cost of nursing home care. The implementation of 
that law actually defining the full cost of nursing home care 
was narrowed as to these costs.
    When the VA testified at the hearing, they said many 
States, in their written testimony, agreed with the new 
regulations. The testimony was a few States. When I asked the 
VA what States agree with it, they named two. And out of the 
two, Connecticut, actually we heard from the State Veterans 
Nursing Homes, that they disagree. The problem being is the 
language in the law was full cost. The VA narrowed what that 
full cost was to be.
    When I further asked, well, how are they going to make up 
the difference for the additional cost that the VA does not 
cover, they said, well, they can charge it to third-party 
billing. The problem is because the rules that were implemented 
stated that if they accept payment from the VA, that is payment 
in full.
    So you have State-run nursing homes that have a large 
Medicare, Medicaid population, they cannot collect it. So I 
said because it is payment in full, where else are they going 
to get the money. The answer was long-term health care, which 
veterans have long-term health care.
    So my concern is the fact that when we enact laws, the 
implementation sometimes might not be in the proper manner. And 
my concern if we give you this new administrative change, you 
know, exactly whether or not that might be contrary to what we 
are enacting.
    And I wanted to feel comfortable that what you are saying 
and how it actually gets implemented is correct, not like the 
situation that we ended up hearing last week with reimbursement 
rates for nursing homes because it does have a negative effect, 
where actually we had a hundred percent service-connected 
disabled veteran who was refused access to a nursing home and 
ultimately passed away before he could get the care that he 
needed because of how the VA implemented the law.
    So I just want to make sure that what you are saying today 
and how you want to see this new administrative change work is 
actually how it is going to work.
    Secretary Shinseki. Fair question, Congressman. And I will 
go back and take a look at this case that you have cited and 
see whether whatever answer, whatever position we gave makes 
sense to me. I will get into that and provide you a response.
    I guess you will have to take my oral statement for what it 
is worth and that is that nowhere in this request is there an 
intent to squander or diminish the care we provide to veterans. 
That is the first statement in the mission. In fact, I have to 
do this in order to be able to fulfill that because just 
looking at the cost curve, not just for health care, but just 
the cost of operating government, the President has asked us to 
do a good hard look. And so I want to do this. But for every 
dollar that I am able to save, the intent is to turn this 
around and return it in terms of care and benefits and 
increased access and higher quality services we provide 
veterans. That is the end result here. That is the target we 
are shooting for.
    Mr. Michaud. Well, thank you very much. And I do take you 
for your word. You are a very honorable man and really 
appreciate all that you have been doing.
    And I know on the nursing home issue, that started before 
you became Secretary, but the culture within the VA is, you 
know, that is a big concern of fours. I know it is hard to turn 
it around and you are doing the best that you can.
    I want to be very supportive of what you are doing. But at 
the same token, I am also concerned that once we pass laws, our 
intent is implemented by the VA because I can see the whole 
nursing home area reimbursement could be the Walter Reed of the 
VA system if it is not addressed quickly.
    Secretary Shinseki. Okay. Thanks for that insight, 
Congressman.
    Mr. Michaud. Thank you.
    Secretary Shinseki. I will provide it for the record.
    [The Committee staff has been meeting with VA on the State 
Veterans Homes issue.]
    The Chairman. Ms. Brown, did you want to follow-up on that?
    Ms. Brown of Florida. I will just listen and then I will.
    The Chairman. Okay. Thank you.
    Regarding the issue that Mr. Michaud brought up, I ask you 
to provide the Committee with your investigative work on that.
    Secretary Shinseki. I will.
    The Chairman. Mr. Brown.
    Mr. Brown of South Carolina. Thank you, Mr. Chairman.
    Mr. Secretary, just so I can get, I guess, a little handle 
on the process today as we move forward, I guess, to 
consolidate the acquisitions, is each hospital basically 
independent in their acquisitions and supply of their needs?
    Secretary Shinseki. One hundred and fifty-three hospitals. 
I think that is for the most part true. There may be a number 
of hospitals that are linked together where those orders are 
done in combination, working together, or a Veterans Integrated 
Services Network (VISN) has imposed some kind of control. But 
for the most part, contracting is done across the spread of VA.
    Mr. Brown of South Carolina. Is there any oversight? Do the 
VISNs have any kind of an oversight over those purchases or are 
they pretty well independent themselves?
    Secretary Shinseki. They do have, but it is difficult at my 
level to see how well we do that, what we buy, how we buy it, 
and when we buy.
    The impact on cost could be influenced by when you decide 
to buy a certain product, especially when we are buying in such 
large volume as we are.
    I will just use the example, after this winter, of snow 
blowers. If we buy it at the beginning of the snow season, we 
are going to pay a certain price. If we buy it at the end of 
the snow season and demand that for our purchase we want a full 
warranty, we are going to get a far different price. I just 
want us to be smart about it.
    Mr. Brown of South Carolina. So you are saying that you are 
going to have this Under Secretary then. And then all the 
requisitions will come through that one station?
    Secretary Shinseki. We want to centralize the policy on 
procurement and acquisition and list what it is that we are 
going to underwrite. And then decentralized execution of that 
means people can off of that list be able to execute the 
purchases.
    And there is a practical side to this as well. We all 
remember the endoscopy set of events that we went through. When 
I went to take a look at it, we had, I do not know, 25 versions 
of endoscopes, 28 versions of endoscopes. And I think everyone 
who had an interest in having a particular endoscope was very 
happy with that arrangement, but all of the responsibility for 
assuring the safety that goes along with performing endoscopies 
falls on the youngsters in the basement of a hospital that are 
in the steam room trying to clean each of 24, 25 versions and 
meeting the established regimen for, according to that 
manufacturer, of meeting the mark, each using a different set 
of cleaning tools, each using a different set of solvents or 
whatever is used, so the risk in the system falls on youngsters 
who are doing the best they can, but we have created for them 
an almost impossible task.
    I think manufacturers also have a role they can help us 
with, and that is to improve the engineering interface. As I 
have said, if we have a valve, two valves, one is a one-way 
valve which is safe and another one is a two-way valve which is 
not safe and we color code it the same color and we allow them 
to be hooked up, then it is going to require someone to be 
especially attentive to make sure that we have got a one-way 
valve in place for that procedure.
    With our ability to bring contracting under our control, we 
can seek the help of manufacturers to give us color coding or 
other safety features that do not allow the wrong valve to be 
coupled.
    Mr. Brown of South Carolina. It would be a whole lot 
easier, too, to transfer personnel between the different 
hospitals.
    Secretary Shinseki. Absolutely.
    Mr. Brown of South Carolina. How about the pharmaceuticals 
now? Are they under one master requisition or each hospital has 
their own purchasing plan?
    Secretary Shinseki. Let me call on Mr. Frye.
    Mr. Brown of South Carolina. Okay.
    Mr. Frye. Thank you for that question. That is a great 
question.
    And I would argue that the VA, the Veterans Health 
Administration (VHA) specifically, has one of the best managed 
pharmaceutical programs in the government. And it is centrally 
managed.
    There is a Program Management Office located in Hines, 
Illinois, out at our National Acquisition Center that is 
staffed by people that have all sorts of experience and 
expertise in the pharmaceutical arena. There is a Program 
Manager located at the Central Office here in Washington. And 
in my opinion, they do a great job of managing that program, 
but it is centralized management of the Pharmaceutical Program.
    Mr. Brown of South Carolina. So I guess ultimately the 
other parts of the purchasing will be similar to the 
pharmaceuticals then?
    Mr. Frye. Yes. The way it works is there is a formulary and 
the stockage is based on that formulary. And orders are placed 
by the individual pharmacies against that formulary. And so it 
is run very efficiently and I think we have seen the GAO 
reports that have said just that.
    Mr. Brown of South Carolina. That is a real bright spot in 
the VA. And I wanted to bring that up because you all are doing 
such a good job with it and so I can, you know, understand now 
maybe, you know, some parallel as you move forward in it.
    But we are excited about this new venture. In particular, 
we can save, you know, $2 billion a year. Mr. Secretary, that 
is a sizeable savings. And I think, too, you will have a whole 
lot better uniformity, too, throughout the process.
    And so I commend you on this. Thank you very much for being 
here today.
    Secretary Shinseki. Thank you.
    The Chairman. Thank you, Mr. Brown.
    Mrs. Halvorson.
    Mrs. Halvorson. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being here. It is good to 
see you guys.
    I have a couple questions. But first of all everybody knows 
that I have bothered you every single time I see you about 
Silver Cross in my district, which is going to be vacant soon 
because they are building down the street. And, you know, it 
has presented the VA with a wonderful opportunity because they 
built it 3 years ago for a cost of $20 million and here you 
have this opportunity to get it for almost free.
    Now, I am worried about this time-sensitive bureaucracy not 
being flexible. So you are bringing on possibly an Assistant 
Secretary who is in charge of that sort of thing.
    Would he be in charge of this time-sensitive bureaucracy, 
procuring or acquiring property? Would he be in charge of 
something to help through the bureaucracy because I feel that 
it is moving a little slower than I would like it and 
especially my constituents want because they think it is just 
something that I can flip the switch and it would happen?
    The Chairman. I would like to correct the record. She meant 
he or she.
    Mrs. Halvorson. Yes, he or she, the person.
    Secretary Shinseki. Congresswoman, the intent is to be able 
to look long term, think strategically, and see what our 
opportunities are so we have in place decision makers that will 
then leverage these decisions faster.
    I have said that for the next 2 years, we have strong 
budgets and I need to get this in place and be able to force a 
return on investment. So when I say think strategically, I 
think we should be out there understanding what our 
requirements are, out there looking for opportunities like 
this.
    In this case, thanks to you, it was brought to our 
attention. And I understand a team has visited and found it a 
very strong option.
    Mrs. Halvorson. Uh-huh.
    Secretary Shinseki. So we are in the process of following 
up on that. But we ought to have that capability as well to be 
looking out there on how we understand our requirements and see 
what our options are out there and then, yes, absolutely, take 
the insights from Members of Congress.
    But I think in this case, had you not brought it up to us, 
we might have missed it. So hopefully this will come out well.
    Mrs. Halvorson. Great. And then my other question is the 
fact that, and Chairman Filner has been out there and he is the 
one that keeps bringing up the fact that there are 200 beds 
also attached because it used to be a hospital or it still is a 
hospital, it will be vacant. You know, we are talking about the 
emergency room med center that you all are looking at. But 
there are 200 beds connected to it, which could be used for 
many things, whether it is the homeless, whether it is, you 
know, a hospital, or long-term care because there are so many 
waiting lists.
    I have two veterans homes in my district and the State 
keeps cutting back and cutting back.
    Is it your practice to purchase then other property to 
house veterans in long-term care?
    Secretary Shinseki. Our intent is to take care of veterans 
however we need to do that. And so we look at a variety of 
options. We try to settle on the one that is most cost 
effective, but the primary driver here is how do we best take 
care of veterans, whether it is build, lease, purchase, assume. 
We are willing to look at the whole list of opportunities.
    Mrs. Halvorson. Because it is very frustrating in my office 
to hear from the veterans who have done so much for us who are 
on waiting lists and a lot of them die before they even get to 
the front of the list to get into these veteran homes. And I--
--
    Secretary Shinseki. These are the State Veteran Homes?
    Mrs. Halvorson. Yes. They are the State ones.
    Secretary Shinseki. Yes.
    Mrs. Halvorson. But it would be nice if, you know, you have 
those 200 beds, if we could just keep that on your radar screen 
also, that is connected to the facility.
    Secretary Shinseki. I will.
    Mrs. Halvorson. Thank you.
    And I yield back.
    Secretary Shinseki. Thank you, Congresswoman.
    The Chairman. Thank you, Mrs. Halvorson.
    Mr. McNerney.
    Mr. McNerney. Thank you, Mr. Chairman.
    I was expecting you to call Mr. Stearns first, but I will 
go ahead and take your----
    Mr. Stearns. And I yield to the Ranking Member, Mr. Buyer.
    Mr. McNerney. Okay. Thank you.
    Mr. Secretary, I have to say I respect your sense of duty 
in taking on this position as Secretary. And also, I admire 
your ambition. I mean, the goals that you have laid out here 
specifically and the ones that drive me the craziest are the 
backlog and the homelessness. And if we can attack those with 
the vigor that you are showing, we will make a lot of progress. 
So I thank you for that service, Mr. Secretary.
    Regarding the new positions, are there people within the VA 
now carrying out those duties and responsibilities, as far as 
you know, or is this something that is sort of a new structure 
that will bring in people for entirely new responsibilities?
    Secretary Shinseki. Let me call on Mr. Frye.
    I would say there, as you might imagine in any 
organization, there is somebody covering these 
responsibilities, but without the authority and without the 
resources.
    We centralized IT 3 years ago. Five of the eight Deputy 
Assistant Secretaries I am requesting go into the IT Program to 
flesh out the responsibilities that they should be providing.
    One of the Deputies would look at strategic architecture 
and design. Another Deputy Assistant Secretary will look at 
product development and delivery, overseeing 900 employees. A 
third IT Deputy Assistant Secretary would address enterprise 
program management that cuts across the entire Department, 
another DAS would be responsible for performance management, 
tracking our commitments on IT, and then the fifth Deputy 
Assistant Secretary for Operations and Engineering would have 
leadership responsibilities of over 5,000 people.
    There is somebody filling a seat without the authority they 
need and they are doing the best they can. And what I am 
looking for is the opportunity to give them the authority so 
they can move out.
    I think part of the reason it has taken us 3 years--this 
was the right move--to get to this point is that we needed to 
put a structure in place and that is what we are asking to do 
now so we can move out smartly.
    Let me just ask Mr. Frye if he has anything else to add.
    Mr. Frye. Sir, if I could address the Assistant Secretary 
position. The Services Acquisition Reform Act of 2003 requires 
that we have a Chief Acquisition Officer. That Chief 
Acquisition Officer is filled today. It is filled by my boss, 
Mr. Glenn Haggstrom, who is the Executive Director of 
Acquisition, Logistics, and Construction. He is delegated that 
authority by the Secretary and the Secretary, of course, serves 
as the head of the activity.
    So those functions have been undertaken. They are being 
embraced by the Chief Acquisition Officer. And the Chief 
Acquisition Officer further delegates authority to myself, the 
Senior Procurement Executive, to develop policy and promulgate 
that policy across the VA.
    We have all heard of these breaches in performance out 
there and it may be that we do not have appropriate policy 
developed and promulgated or it may be that we simply have 
individuals that do not adhere to the policy. And in many 
cases, that is the result. And you have seen the GAO and the IG 
reports that reflect that.
    But to answer your question, yes, we have a Chief 
Acquisition Officer. Currently that Chief Acquisition Officer 
is not at the Assistant Secretary level. This acquisition and 
procurement machine has many, many moving parts. It is my 
personal opinion that we need this Assistant Secretary to 
synchronize the movement of these parts and provide unity of 
effort across the enterprise.
    Mr. McNerney. Well, the thing I liked about your answer was 
that it will give somebody the responsibility or the authority, 
but from our point of view, the responsibility so that we can 
call him in front of us and ask questions if things go wrong 
and giving him praise if things go right.
    So the point in my asking this is that we want the VA to be 
responsive to the veterans and to the needs and just making 
sure that those new positions do not create a layer of 
bureaucracy, as you mentioned, or the sort of red tape that has 
characterized the VA in the past and actually makes it more 
responsive. And if we can carry out and achieve that objective, 
then you have been successful. So----
    Secretary Shinseki. I would also add the law requires that 
the Chief Acquisition Officer be a noncareer individual and we 
are not quite in compliance right now. And so the intent here 
is to meet the obligation here.
    Mr. McNerney. Okay. Well, thank you for your Herculean 
ambitions here and your efforts. I appreciate it.
    Secretary Shinseki. Thank you.
    The Chairman. Mr. Stearns?
    Mr. Stearns. Mr. Chairman, I think the Ranking Member was 
here before me, but if I could, I would like to strike a point 
of order, Mr. Chairman.
    I have been to Committee hearings here a number of times in 
which you have gone to the Democrats without coming to the 
Republicans. So I asked the staff to give me the rules on this. 
On page three, Rule three, paragraph F, let me just read it to 
you.
    The questioning of witnesses in both Committee and 
Subcommittee hearings shall be initiated by the Chairman 
followed by the Ranking Minority party Member and all other 
Members alternating between the Majority and Minority.
    These are rules that you approved and these are the rules 
of the Veterans' Affairs Committee. So I would say to you I 
appeal to your fairness here and appeal to regular order that 
in this Committee and all future Committees, you alternate 
between Majority and Minority. And I would request that you do 
that.
    The Chairman. I thank you for pointing out the rule. I have 
expressed several times that we would recognize Members who 
were not here at the gavel in the order of their appearance at 
the hearing.
    I would appreciate also, Mr. Stearns, the courtesy of being 
here for the testimony if you are going to ask questions. So 
you are recognized.
    Mr. Stearns. Oh, I understand. But I think you want to 
abide by the rules because----
    The Chairman. Yes, sir. You are recognized for your 5 
minutes.
    Mr. Stearns. Okay. Mr. Secretary, let me just thank you for 
coming here today and just tell you how much we appreciate your 
hard work.
    When I came to Congress, the budget of the Veterans 
Administration was quite smaller than it is today. In fact, the 
Department of Education's budget was, I believe, higher. Now 
except for the U.S. Department of Defense (DoD), it is the 
second highest amount of money we spend--$125 billion proposed.
    My question is, before I get into details and talking about 
some of the problems we have had, are you finding it 
frustrating to control such a bureaucracy?
    I know that you are going to outside sources, 
PricewaterhouseCoopers (PWC), to do some kind of accounting. I 
mean, is it a possibility that systemic to the Veterans 
Administration through this huge increase in funding and the 
demands of veterans coming back that it is maybe something that 
is difficult to operate, shall we say, from an accounting 
standpoint and know where all the money is going? That is just 
a general question.
    Secretary Shinseki. Congressman, I think your point is a 
good one. These two budgets, 2010, 2011, are significant. But I 
know this kind of funding cannot continue and so I have to put 
in place now those investments that are going to create for us 
the opportunity to be as effective in the future of caring for 
veterans even as we try to increase quality and, you know, open 
access to more veterans because of the economic difficulties 
who are coming to us and more veterans who are coming back.
    So the issue of how do we do this, control, I think, is the 
word you used, centralization is one way of doing that. But my 
experience on either end, centralization versus 
decentralization, I think we can look back at the lack of 
control and discipline in place and say that was a result of 
decentralization. We know what that has cost us in 
opportunities and we are trying to put in place the fixes.
    By the same token, going to the other end of that spectrum 
and talking about full centralization, my concern would be that 
we lock down our processes in a way that it lacks 
responsiveness and agility to respond to veterans who come to 
us and seek the kind of support and services and benefits that 
we provide.
    I have run a study. I have asked internally for a review of 
the options. Frankly, I was given two options to consider, one 
to integrate where we stand today or to go to full 
centralization. I turned the study around and I said there was 
a third option here that I wanted to have described for me and 
that is the option that begins with the integration step and 
then a discussion of whether or not to go to centralization as 
a second step. And then what are the conditions that would 
allow that kind of a decision and how long might it take to 
achieve those conditions? And that is what I am waiting for, a 
return report, probably within the month, to be able to lay out 
a decision.
    Mr. Stearns. The staff informed me about a hearing that I 
attended dealing with how money was spent and the $5 plus 
billion in the miscellaneous fund. And during that hearing and 
subsequent hearings, we had a little difficulty understanding 
where all that money was the miscellaneous obligations.
    And I understand that you have hired 
PricewaterhouseCoopers, a consulting firm, accounting firm, at 
$850,000 to help you. And then you have a follow-on contract 
for $350,000, is that correct, with PricewaterhouseCoopers?
    Mr. Frye. Sir, actually, we hired PricewaterhouseCoopers to 
do an initial study of the VA procurement structure and our 
command and control issues in 2008. That study was completed. 
As the Secretary has already said, some of the recommendations 
were implemented, three important ones.
    First, we reduced the numbers of heads of contracting 
activity from 31 to 6, a significant reduction in the VA.
    Secondly, out in VHA where virtually every hospital managed 
their own procurement affairs, a structure was established 
whereby a Chief Procurement Officer position was put in place 
in VHA and a Deputy Chief Procurement Officer. Today I will 
report to you that all of the procurement personnel in VHA 
report up to that Chief Procurement Officer.
    So we think those changes were significant changes and they 
really add to that unity of effort and our ability to exercise 
command and control over those contracting professionals that 
are out in VHA.
    I hope I answered your question.
    Mr. Stearns. Okay. And the follow-up contract is for what, 
the $350,000?
    Mr. Frye. Oh, I am sorry, sir. Yes. We then contracted with 
PWC this year in January to conduct a follow-on contract. And 
the Secretary has already talked about the purpose of that 
contract, but it is to do a follow-on to the initial study that 
was done in 2008 and look at our structure and see if there is 
not a better way of doing business, so to speak, and that is 
where we are at now. And as the Secretary has already stated, 
the results of that study and the executive decisions will come 
about in about 30 days.
    Mr. Stearns. Thank you, Mr. Chairman.
    I think you, as Chairman----
    The Chairman. Thank you, Mr. Stearns.
    Mr. Stearns [continuing]. Should consider, you know, 
pursuing this area and to see with the Secretary if we have the 
need for oversight, a simple oversight policy on a running 
basis that continues to look at the Veterans Affairs budget.
    The Chairman. Thank you.
    Mr. Walz.
    Mr. Walz. Thank you, Mr. Chairman and Ranking Member.
    Mr. Secretary and your staff, thank you for being here.
    It is a compliment, but maybe a sad state of affairs for 
me. I think I see you more than I see my family now. So you are 
here often. You are very accessible. Your staff is, too, and 
for that, I am very, very appreciative.
    Yesterday we had a hearing and Mr. Buyer was talking about 
some of his initiatives and one has been acquisition reform. 
And it is something that I have watched go on. And he talked 
about our Ranking Member is going to be retiring. And I said 
how we need to make sure that this legacy continues and having 
this hearing today is that.
    I also reminded him that many of us may be retiring in 
November, but our veterans will still be there. The care for 
them must still be there and our responsibility to make sure 
that the things are in place that stay behind as a legacy 
behind us are there.
    So I am appreciative of what you are saying. I am 
interested about a couple of things I would ask. I want to ask 
just a quick question.
    The PMAS, you talked about implementing that. Are folks 
buying into that?
    Secretary Shinseki. Absolutely. I think we have been able 
to demonstrate to all of our folks that are involved in IT that 
this makes good business sense.
    I am sure there are going to be a couple which are either 
over schedule, over budget, or behind schedule that are not 
happy with where they are, but they understand why they are 
there and what we expect.
    So in terms of transparency, in terms of getting folks to 
understand where we are headed, and getting them to take the 
corrective actions here, it is easier than chasing down each 
little----
    Mr. Walz. Well, I am interested in this because what you 
are doing is you are getting at the heart of systemic change of 
the organization and the culture and it is turning that 
battleship type of thing. And I am interested in this because I 
think all of us understand it is care for the veterans as well 
as safeguarding those dollars.
    And as we are putting in money, Mr. Stearns is right, we 
need to be very, very critical of where the money is going and 
make sure that it is making an impact because if we do not then 
we will not be able to get it in the future.
    So I have watched this acquisition process and I understand 
that everybody has this great idea. They want it to be adopted 
right away or whatever. I understand it is a two-fold process 
for you to make sure we are watching for fraud, waste, and 
abuse. We are making sure that it goes through there. But I 
have to tell you I have seen some pretty interesting things.
    We have a one o'clock meeting with Bill Gates today and I 
was talking I am not sure if Bill Gates came in with an IT 
solution for us he would get through the red tape and get his 
product in at this point. So I am very happy you are moving 
down this.
    And what I wanted to say is you, Mr. Secretary, have a 
unique ability here. You have worked with the Joint 
Capabilities Integration and Development System on the other 
side. You have seen it work with Abrams. You have seen it knock 
out Crusader and things like that.
    The one I was really interested in is, is there anything to 
learn from DoD, not that it is perfect. But something my staff 
and myself and I have seen personally work is the Program 
Executive Office (PEO) Soldier thing, of being able to cut 
through that, to see a great piece of technology, to see a 
great program, and be able to reach down, pull that out and 
implement it quicker.
    Do you have that ability? If you have that ability, would 
it be better? Could we still have accountability of the dollars 
as well as fielding things quicker whether it is, you know, 
telemed or whatever? I just ask if you think that is a way to 
go?
    Secretary Shinseki. Well, just very quickly, two points. 
First of all, on PMAS, we have already saved $56 million on the 
17 projects that were not meeting standard and which we have 
stopped and harvested that money and reinvested it in other 
projects that seem to be moving in the right direction. So 
this----
    Mr. Walz. Before PMAS, would that have happened?
    Secretary Shinseki. I am sorry?
    Mr. Walz. Before PMAS, would that have happened----
    Secretary Shinseki. As a result----
    Mr. Walz [continuing]. Or would they have continued to run 
a natural course?
    Secretary Shinseki. Probably not.
    Mr. Walz. Okay.
    Secretary Shinseki. Probably not. I will attribute that to 
the changes that have occurred since Secretary Baker arrived--
--
    Mr. Walz. Okay.
    Secretary Shinseki [continuing]. Someone who has a great 
background in the IT world and who thinks strategically. And 
this what--it has been a year--this is what he has been able to 
accomplish. What I am looking for is Baker's counterpart in a 
$15 billion enterprise of acquisition, logistics, and 
construction.
    To get to your question, we do not have a PEO Program 
Manager, a doctrinally-based acquisition program as you are 
describing.
    Mr. Walz. Could we have a PEO Vet like we have a PEO 
Soldier?
    Secretary Shinseki. We could, and that is part of this 
first step is to create the conditions under which we might 
investigate how we put together a formal acquisition program 
that looks long term strategically that develops the workforce 
to have the strengths that DoD has been able to grow with their 
program management acquisition.
    Mr. Walz. And this request for the Assistant Secretary is 
the first step in leading to the next thing of maturing this 
acquisition process?
    Secretary Shinseki. Yes.
    Mr. Walz. Okay. That is all I had. I yield back.
    The Chairman. Thank you, Mr. Walz.
    Mr. Buyer.
    Mr. Buyer. Thank you. Thank you very much.
    Sergeant Major, I would ask of you to help us with your 
academician as we proceed with this. Okay? You bring some 
expertise.
    And I am also hopeful, Mr. Chairman, that some years back 
when we gave the Oversight and Investigations Subcommittee 
legislative authorities, they have a great deal of investment 
of time in the acquisition, all the hearings that they have 
done, and that might be the best Subcommittee, I think, to move 
the acquisition and acquisition bill. I just throw that up for 
consideration.
    I think what would be really helpful here over the next 30 
days, Mr. Secretary, is as we try to formulate this 
legislation, please, what I am going to ask of you since we can 
leave the record open, articulate your acquisition policy. So 
submit that for the record.
    So it is one thing to ask for the positions. Let us couple 
that with your specific intent. So we will take the policy, put 
that into the record. It will help substantiate why you are 
asking for these eight positions. And we will have a better 
understanding.
    With regard to us then outlining these positions by title, 
I also believe it will be fruitful for us to outline their 
responsibilities. And I will embrace your recommendation to the 
Committee that when we do with specificity on each of these 
titled positions, that each one of them, we will put in proper 
language giving you as Secretary authority to take that 
position and move it throughout the, quote, the Department.
    So I am not going to hold you to particular silos. I think 
it would be good to give you that flexibility. Would you work 
with us to do that?
    Secretary Shinseki. Definitely I will. And we will be happy 
to provide the requested description of what each of the eight 
DASs will be doing and what their responsibility and scope 
would be. But I do appreciate the flexibility that allows the 
Secretary, whoever the Secretary is, the opportunity to be 
agile.
    [The VA met with Congressman Buyer and staff regarding VA's 
acquisition policy in June 2010.]
    Mr. Buyer. Yes. I think you made a good point from our 
discussions. You know, we may not touch this for 30 to 40 years 
and who knows what a future Secretary finds that some new need 
may be required.
    And if, in fact, we have things running smooth over here, 
he might need that political appointment in some other 
Department. So I think that would be a good thing for us to 
talk about and work that through.
    And that is an implementation issue, Sergeant Major. That 
is why I think putting your eyes on it will be helpful to us.
    The question on resellers, in the proposed legislation that 
I have--if I may, Mr. Secretary, could I go directly to Mr. 
Frye? Would that be all right?
    Mr. Frye, I would like for you to put your eyes on Section 
7 of the bill. I know you do not have it in front of you.
    But earlier, Mr. Secretary, I made a pledge to you that I 
would not try to be as prescriptive and I will take out of the 
bill areas that I could move to report language and give you as 
much deference for executive authority as I can. Okay? So I 
will do that.
    But please, Mr. Frye, on Section seven of the bill, we 
addressed these issues making sure that the contract for the 
purchase of a commercial item that the vendor the item is 
either a manufacturer or a regular dealer. And we get in to 
then address these issues for which Chairman Mitchell and 
Ranking Member Roe got into dealing with the resellers.
    So we get into this whole issue about resellers. And I 
would like your thoughts about this issue because there are 
legitimate and then there are not so legitimate.
    Mr. Frye. Thank you, Mr. Buyer.
    Your concerns are shared by those of us involved in this 
issue in the VA. It perhaps is a government-wide issue, but it 
certainly affects us in the VA and it certainly affects us in 
the execution of our duties with our Federal supply schedules 
that are run and managed out of the National Acquisition Center 
in Chicago.
    We agree that the reseller business model is a legitimate 
business model. It certainly is. And we deal with resellers on 
a daily basis out of our National Acquisition Center.
    The problem arises when--and by the way, it is also a 
commercial model--but the problem arises when firms--and I will 
use the word storefronts--establish themselves and declare 
themselves to be resellers and there is no value added.
    In some instances, we found where literally a vendor set up 
operation in a garage. They had no stock. They had no supplies. 
And they simply drop-ship products to VA facilities. There was 
no value added there. And what it does for us is add six, 
seven, eight, ten percent to the cost of those items at the 
expense of our veterans.
    So that is the issue that we need to look at and perhaps we 
need help in establishing the definition of reseller because I 
do not believe one exists across the government today.
    And I think that is where our Office of Inspector General 
has been reaching out to. They would like to see a definition 
of reseller there so that when we send our auditors to the 
field to do these pre- and post-award audits with these Federal 
supply schedule vendors, we have the ability to look at a 
storefront operation and say that is not where we need to go. 
We need a legitimately run operation here, a legitimate 
reseller.
    Mr. Buyer. Mr. Frye, I do not believe it would be prudent 
for us to legislatively define the word reseller. Would you 
agree with that?
    Mr. Frye. It is my personal and professional opinion that 
yes.
    Mr. Buyer. We should not statutorily define reseller. In 
the language, what we have done here is we said that you ought 
to be working with that specific vendor, a manufacturer, and 
then we actually then say unless the Secretary specifically 
provides for a waiver of such requirement for such concern.
    So if you have got legitimate resellers that add value, 
then the Secretary ought to be able to utilize them.
    Mr. Frye. Absolutely.
    Mr. Buyer. I attended one of the Subcommittee hearings that 
Chairman Mitchell had done with Ranking Member Roe and they 
went right at this issue. And the IG testified. And it was 
pretty deplorable.
    And what I am going to ask of you is please put your eyes 
on Section seven. If there is a way that we can best work 
through this, I do not want to exclude legitimate resellers 
that add value.
    So the savings, Mr. Secretary, that you are hoping to 
accomplish, much can come from Section seven. But I want to be 
able to write this in a manner that does not harm the 
legitimate ones.
    The other issue with regard to--may I?
    The Chairman. Certainly.
    Mr. Buyer. With regard to the issue of the proposal for a 
fourth branch dealing with the economic opportunity issues, I 
note that you had shared with me in private that you have a lot 
of challenges on your plate. And I recognize that and I have no 
interest in sending a bow-wave to you.
    So maybe the best for us to do is have a meeting of the 
minds whereby in the legislation we ask for an analysis on if 
we move this way, what is the best way that it would be 
implemented. So we can move it to a study and analysis.
    Mr. Secretary, would that be workable with you?
    Secretary Shinseki. That would be agreeable. I think I 
would just say on the fourth administration, I know I could not 
implement it now with the challenges that I have taken on about 
breaking the back of the backlog, about the homeless issue.
    But until I get the acquisition, the reforms into place, I 
do not know that I could even begin to answer that question. So 
I think a study of some kind might be a worthy way to go. And I 
am happy to work with the Committee on that.
    Mr. Buyer. Okay. May I in conclusion?
    The Chairman. Yes.
    Mr. Buyer. All right. Thank you.
    I believe that you should have these political appointments 
and if you get us that policy that helps move this in place, we 
will make sure that you have the flexibility. We will do a 
Study Committee on the fourth branch and we will have Mr. Frye 
put his eyes on that Section seven to make sure that you get 
what you need. Is that good? Awesome. Thank you.
    The Chairman. Just for the record, you were not speaking 
for the Committee. You were speaking for yourself. We have not 
passed that legislation yet, so we have not done any of this, 
right? Am I correct?
    Thank you.
    There was nothing settled, it was simply ideas.
    I appreciate you being here, and your laying out your 
vision. We look forward to working with you to realize it.
    Secretary Shinseki. Thank you very much, Mr. Chairman.
    The Chairman. This hearing is adjourned.
    [Whereupon, at 11:46 a.m., the Committee was adjourned.]

                            A P P E N D I X

                              ----------                              

            Prepared Statement of Hon. Bob Filner, Chairman,
                     Committee on Veterans' Affairs

    I would like to thank the Members of the Committee, Secretary 
Shinseki, and all those in the audience, for being here today.
    The VA is the second largest agency in the Federal Government. With 
more than 245,000 employees, the VA oversees the largest integrated 
health care system in the country along with a vast array of benefits 
programs to compensate the service and sacrifice of our 25 million 
veterans.
    Reforming the VA and remaking it into a 21st Century organization 
that can serve as a model for other areas of the Federal Government is 
a monumental task. Today's hearing enables this Committee, and the VA, 
to begin the conversation on how best to undertake this transformation.
    Mr. Secretary, today, we are here to listen to you. We want to hear 
your views on the future of the VA, the challenges that face the VA in 
the future and what your needs are to transform this agency into a 21st 
Century organization.
    Today's hearing is not a legislative hearing on specific bills. 
Rather, we want to hear about your vision and your assessment of what 
tools you need, including a proposal you support that was first put 
forth by Secretary Nicholson that would amend title 38 to add an 
additional Assistant Secretary and eight Deputy Assistant Secretaries.
    We are not looking for a piecemeal approach to structuring VA to 
best address the needs of America's veterans.
    We look forward to hearing your thoughts, sharing our thoughts, and 
examining proposals to provide the important structure and change we 
need at the VA to ensure it is responsive to our veterans. Our hope is 
to come out of this with a plan we can all get behind that meets the 
needs of the Department and our veterans.
    Historically this Committee has worked in a bipartisan fashion to 
address the needs of veterans. And at the end of the day, regardless of 
our differences, that is what we are all here to do.
    Mr. Secretary, on both sides of the aisle, you have Members 
committed to working with you to make the VA the very best organization 
it can be. Many of us have ideas, proposals, or thoughts on how to do 
that. The Committee believes in providing the Executive Branch wide 
latitude in organization matters, but we retain a strong interest in 
ensuring that organizational changes will improve the VA's ability to 
administer benefits and services to veterans while improving 
accountability.
    We wish to thank you, Mr. Secretary, for your leadership, as well 
as the employees of the VA, for the devotion to veterans that you all 
demonstrate day after day.

                                 
              Prepared Statement of Hon. Harry E. Mitchell

    Thank you Chairman Filner, and thanks to Secretary Shinseki for 
coming to participate in the hearing today.
    The President and Secretary Shinseki have made a clear goal of 
transforming the VA into a 21st Century organization, and we are here 
today to move toward that goal.
    I wish to highlight two of the many important issues that this 
Congress and Administration must address to meet that goal:
    First, I believe, in order to transform the VA into a 21st Century 
Organization, we must ensure that the acquisition process within the VA 
is one that is fair, fiscally responsible, and effective.
    Mr. Secretary, I know from my role as Chairman of the Oversight and 
Investigations Subcommittee some of the long-standing challenges in 
acquisitions. Recently, we held a hearing examining the extent of the 
reform needed in order to improve the acquisition process.
    One recent report, produced by the U.S. Government Accountability 
Office revealed that Network and Medical Center staff within the 
Veterans Health Administration failed to use the Federal Supply 
Schedule, or FSS, due to a lack of information and the proper tools 
needed to use the FSS. This resulted in a lost savings of almost $8.2 
million a year or $41 million over 5 years.
    This is simply unacceptable.
    And I know you share this same concern, and I know you know how 
much work needs to be done to improve the acquisition and procurement 
process.
    Additionally, I believe the VA needs to aggressively reduce the 
claims backlog. The VA must deliver these earned benefits in a timely 
manner.
    As many have noted, there is a backlog of disability claims that 
stretches hundreds of thousands of veterans long. I am pleased that the 
Administration has requested more than 4,000 new claims processors in 
their FY 2011 request. However, I believe that the VA needs more than 
additional manpower to reduce the backlog.
    The VA needs a long term strategy and plan.
    This will provide better services to our veterans and increase 
their morale and confidence in the VA.
    Finally, I want to say that I am encouraged by Secretary Shinseki's 
commitment to reform the VA, and I look forward to working with him, as 
well as with my colleagues on this Committee, to bring veterans the 
benefits and services that they have earned in an effective and 
efficient manner.
    Thank you all again for attending today's hearing, and I look 
forward to all the testimony being presented today.

                                 
        Prepared Statement of Hon. Eric K. Shinseki, Secretary,
                  U.S. Department of Veterans Affairs
Introduction
    Chairman Filner, Ranking Member Buyer, distinguished Members of the 
House Committee on Veterans Affairs: Thank you for this opportunity to 
discuss our plan for structuring the Department of Veterans Affairs 
into the most effective and efficient organization possible, focused on 
providing veterans the best care and benefits they have earned through 
their service. You have shared important insights with me--both during 
hearings and in personal meetings--on changes that are necessary at VA 
to fulfill President Obama's charge to transform this department into a 
21st Century organization. This hearing is an opportunity to continue 
those conversations.
VA's Strategic Goals
    We've established four strategic goals to guide our path to the VA 
of the future:

      Improve the quality, accessibility, and value of health 
care, benefits, and memorial services;
      Increase veteran satisfaction with VA benefits and 
services;
      Improve workforce satisfaction and make VA an employer of 
choice; and
      Protect people and assets continuously, and in times of 
crises.

    You may recall me mentioning these goals during your Committee's 
hearing on the President's proposed budget for 2011, on 4 February, 
2010. In that testimony, I also set out six, key, high-priority 
performance goals: reducing the claims backlog, eliminating veteran 
homelessness, automating the GI Bill benefits system, establishing a 
Virtual Lifetime Electronic Record, improving mental health care, and 
deploying a Veterans Relationship Management System.
    We have done much to improve services for our veterans, but much 
more remains to be done. Our intent is to effectively advocate for 
veterans by improving their access to, and the quality and value of, 
our services. Achieving that goal requires VA to strengthen our 
management infrastructure in order to leverage results even better than 
our programs have produced to date, instituting greater internal 
accountability in the process.
How will VA make the organizational and management changes to achieve 
        those goals?
    The budget I presented to this Committee on 4 February gives a 
detailed answer to the question of what VA plans to achieve with the 
resources it is requesting. I believe this hearing poses the valuable 
and vital question of how VA will achieve those goals. What does VA 
need to do as an organization to provide veterans the access, 
timeliness, and quality of services they deserve? How will VA achieve 
this level of excellence and become a model for the effective use of 
taxpayers' dollars?
    Three hundred thousand good people come to work everyday at VA to 
serve veterans. Not a single one of them comes to work to make 
mistakes. My job is to focus all our efforts on providing veterans the 
highest quality and safety in benefits and services. Transformation of 
an enterprise our size requires that we act with both deliberation and 
the right sense of urgency--creating haste slowly--making change in a 
systematic, controllable way. We must cut through the barriers that 
have confounded veterans and VA employees, as well, for years now. We 
owe it to those, who have served, to deliver a better VA--more 
responsive, more transparent, more accountable, and more cost 
effective. We need to proceed in a way that allows stakeholders to 
review our plans, internalize them, and use them to help us get it 
right.
    We have made a real commitment to listening carefully to veterans' 
experiences with VA, both the good and the disappointing, and our 
employees about what the front lines of care and benefits delivery are 
like. I've gotten tremendously valuable insights from my meetings with 
veterans and their families, hearing for myself their experiences with 
VA. To learn the nuances and diversity of VA's operations throughout 
the country, I spent four hours with each of 21 Veteran Integrated 
Service Network (VISN) leadership teams, as well as significant 
additional hours with every business line at VBA and NCA. We have 
surveyed over 20,000 employees and conducted many detailed sessions 
looking with fresh eyes at our policies and operational performance 
from top to bottom. We have fundamentally and comprehensively reviewed 
our mission, our organization, and our resources, and challenged all 
our assumptions to find ways to better serve veterans. These 
assessments have allowed some conclusions about how to improve 
effectiveness and efficiency within current resources. We have, in 
fact, moved ahead with some of the logical changes that were needed to 
dramatically improve services veterans are already receiving.
The next step to dramatically better results: strengthening management 
        infrastructure, especially pursuing acquisition reform, paired 
        with continued consolidation of Information Technology 
        management
    I am confident that management and organizational changes already 
underway are moving us in a direction that will incrementally give 
veterans, the Congress, and the taxpayers ever-growing trust and 
confidence in our transformation initiatives.
    We seek to strengthen VA's management infrastructure across all 
five of our departmental management functions:

      Acquisition and Logistics;
      Construction and Facilities Management;
      Information Technology (IT);
      Human Resources Management; and
      Financial Management.

    Stronger departmental coordination and control lead to better 
service, value, and accountability. All of the varied programs, 
initiatives, and services to veterans outlined in our fiscal year 2011 
budget will only work well and consistently when these central 
management functions operate effectively and efficiently. We know you 
are especially interested in programs and proposals for acquisition 
reform. Along with effective deployment of IT tools, we see those 
proposals as critically important to fulfilling VA's strategic goals.
    State-of-the-art planning and execution of IT will be vital across 
all of VA. While we cope with claims backlogs through increased hiring, 
we all know that any long-term solution will require modernizing the 
claims processing infrastructure. Great IT development and execution, 
in turn, depends on very well-managed and disciplined acquisitions 
support and project management, which are based on sensible policies 
and consistently applied customer service from knowledgeable 
specialists. This link between IT success or failure and contracting is 
evident--VA's past IT setbacks, that have tested your confidence in, 
and patience with, our program, have largely been project management 
and acquisition failures.
    For both IT and acquisitions, past weaknesses have stemmed from 
overly decentralized control, lack of enterprise-wide information and, 
in some cases, improvised policies. Managers in the field lacked 
supervision, guidance, and sustained support; and policies were applied 
inconsistently. As you know, positive changes in our IT program, 
including greater centralization, began before my tenure here. With 
that, I missed some of the friction and delay that often occur during 
the earliest parts of a significant transition.
    There is now evidence that these changes are resulting in a more 
centralized and focused IT team. This consolidation allows for the kind 
of discipline represented by the Project Management Accountability 
System (PMAS), which has already begun to help us and which will soon 
produce an effective process distinguishing between best-run projects 
from those requiring revision or termination. It also has enabled 
better management of our IT portfolio, and focused the management team 
on training and development of IT professionals.
    We know, as well, that VA is too big and diverse to have every IT 
decision pass through a single office, so we seek a balance of 
centralized policy and decentralized execution to empower our front-
line employees and maintain consistency and efficiency across the 
organization. We are making progress towards this end.
    While they are very different disciplines, requiring their own 
multi-faceted solutions, some of these same themes in IT reform are 
present also in acquisition reform. In the past, VA's procurement 
spending--almost 15 billion dollars annually--has been highly 
decentralized, resulting in a lack of standardization, accountability, 
and controls.
    We have made progress--initiatives are underway to improve its 
acquisition processes, including:

      Instilling a management approach that aligns system-wide 
policies with mission accomplishment;
      Increasing the collection and use of enterprise-wide 
data;
      Improving training and raising the competence of the 
acquisition workforce; and
      Improving our relationships with over 15,000 suppliers.

    Examples of these improvements:

      Developing a professional workforce and establishing the 
VA Acquisition Academy (VAAA): The VAAA is the only Federal civilian 
acquisition academy, and represents a significant investment in 
growing, training, and retaining a 21st century, professional 
acquisition workforce. The academy's programs include intern, 
contracting, and program management schools. This cutting-edge effort 
was recognized with a 2009 Team Excellence Award by the Office of 
Management and Budget's Chief Acquisition Officer Council. The results 
are evident: 98 percent of VA contracting officers have Federal 
acquisition certification, up from 65 percent in 2008. We have 
increased our dedicated contract specialists from 766 to 1,405 full-
time employees since 2003.
      Executing specialized attention in information technology 
procurement: Recognizing how central IT is to VA's transformation, we 
have established a VA Technology Acquisition Center (TAC) to provide 
dedicated, specialized contracting support to VA's Office of 
Information and Technology (OIT).
      Providing better information management for better 
central decision-making and accountability. VA is working on both 
short-term and long-term improvements to systems and data analysis 
tools to provide decision makers at all levels the necessary 
information for the wise stewardship of taxpayer dollars.
      Mandating integrated teams for all procurements over five 
million dollars: Established in 2009, these Integrated Product Teams 
(IPTs) include subject-matter experts from program offices, 
procurement, legal counsel, and the Office of Small and Disadvantaged 
Business Utilization. Having these components involved at the front end 
of the acquisition process will help ensure VA's requirements and 
acquisition strategies are properly defined and developed.
      Increasing oversight over acquisition offices across VA: 
VA's acquisition executive will evaluate every VA procurement office on 
a regularly scheduled basis. These compliance reviews will help 
identify problems and institute corrective actions, minimizing risk to 
the Department that may result from poor procurement practices.
      Promoting a clear and consistent acquisition business 
model: Using recommendations from a PricewaterhouseCoopers (PWC) study, 
VA has established an acquisition business model that carries out 
centralized decision-making and decentralized execution. A follow-on 
study by PWC will be completed shortly, and we will look at the results 
to further enhance our business model.
      Partnering with the private sector: VA established an 
innovative Supplier Transformation Relationship Initiative, recognizing 
that the supplier community is a critical component to VA's success. 
Better and more transparent communications with vendors yields better 
results--this is why we hosted a forum in August of last year with more 
than 90 companies representing every material, service, and 
socioeconomic area of VA's purchasing. This effort is expanding to 
reach more than 15,000 VA industry partners.
      Promoting advances in management of construction 
acquisition: We have undertaken a transformation initiative in our 
Office of Construction and Facilities Management (CFM) to improve the 
planning and execution of our major and minor construction, and non 
recurring maintenance programs by:

                  Having CFM engaged with the 
                administrations throughout the Capital Planning 
                Process;
                  Maximizing the performance of our 
                facilities through an enterprise facilities management 
                system;
                  Establishing critical engineering 
                capability to support the Department's infrastructure 
                program; and
                  Aligning our programmatic investment with 
                strategic objectives and performance targets.

    Collectively, these measures will improve acquisition service 
delivery outcomes.
What Congress can do to help structure the VA of the 21st Century
    VA needs support from this Committee to fully realize these 
reforms. We appreciate and rely on a close partnership with the 
Congress to effect change at the Department. Your steadfast commitment 
to providing the resources VA needs to serve veterans is deeply 
appreciated. The oversight that this Committee provides also challenges 
VA to perform better, and helps us learn and incorporate the right 
lessons and remedies when we sometimes fall short.
VA-proposed Legislation to Structure VA Acquisition and IT for the 21st 
        Century
    There are legislative changes that would benefit the Department. In 
our 2011 budget package, we described 51 legislative proposals to 
improve and adjust programs across VA. We would appreciate your 
consideration of all of them, but a proposal included in our fiscal 
year 2010 budget in May of last year would be an especially important 
step in structuring our acquisition and IT offices for the 21st 
Century. I advocated for it before this Committee in your April 2009 
``Funding the VA of the Future'' hearing, again when I appeared before 
you on 4 February of this year to present our fiscal year 2011 budget, 
and also in individual meetings with some of you.
    Our proposal would give VA the authority to establish an Assistant 
Secretary for Acquisition, Logistics, and Construction. This is a 
fundamental step in elevating and consolidating the acquisition 
function to its central role in carrying out everything we do in 
support of veterans.
    We have been able to move forward on many of these initiatives, 
even without an acquisition office headed by an Assistant Secretary. 
But these are piecemeal moves of opportunity. Going forward our 
programs need coherence, intellectual rigor, and decisiveness. This 
overdue change will help cement and accelerate all these efforts, past 
and future. The Services Acquisition Reform Act requires the 
appointment of a non-career employee as a Chief Acquisition Officer 
(CAO). The General Accounting Office has identified as a weakness 
situations where the CAO has other duties not related to acquisitions. 
VA remedied this by establishing an Office of Acquisition, Logistics, 
and Construction in October, 2008. But we do not have a senior level, 
assistant secretary to lead that office, and I believe that is 
critical.
    As a practical matter, VA often receives recommendations on new 
technologies or promising innovations, which we are not organized to 
accommodate in more than a superficial courtesy meeting. Polite as 
those conversations are, they usually don't easily lead to leveraging 
potential solutions to some of our challenges. A senior Assistant 
Secretary for Acquisition, Logistics, and Construction would be an 
ideal place to receive, evaluate, and act on the most meritorious 
ideas.
    We have chosen to give acquisition reform prominence--speaking 
bluntly, it is obvious we must do so. If VA is going to be a top-
performing Department, the organizational lines should match up with 
our priorities. Much of this we can do under existing authority, and we 
are--but some actions will require legislation. In an agency this size, 
with programs so diverse and in so many cases having complex 
requirements, such as building major medical facilities, and purchasing 
almost 15 billion dollars in goods and services annually, the need for 
an Assistant Secretary with an exclusive focus on acquisition is 
obvious.
    In addition, this legislation would create eight new Deputy 
Assistant Secretary (DAS) slots. Two of the DAS positions would be for 
a Principal Deputy Assistant Secretary (PDAS) for Acquisition, 
Logistics, and Construction, and a Principal Deputy Assistant Secretary 
for Construction and Facilities Management.
    We would utilize five new DAS positions in the Office of 
Information and Technology (OIT), based on a comprehensive IBM study 
informed by corporate best practices. There currently are only two DAS 
offices in OIT, with responsibility for Information Protection and IT 
Resource Management--holdovers from our pre-centralized OIT 
organization.
    Our proposal would provide for the following additional lines of 
authority, which were transferred to OIT as part of the centralization, 
to support the leadership structure necessary to lead one of the 
largest consolidated IT offices in the world:

      DAS leaders responsible for:

                  Strategy, Architecture, and Design,
                  Product Development and Delivery,
                  Enterprise Program Management Office,
                  IT Performance Management, and
                  IT Operations and Engineering.

    Finally, VA would utilize the last DAS position to support the 
Assistant Secretary for Management. This official would be responsible 
for oversight of VA's capital programs and capital budget formulation. 
I believe these issues are prominent enough to require a new DAS.
    This legislative proposal is not about creating a new layer of 
bureaucracy--it is about streamlining and aligning our organization in 
ways that will better align our priorities with the most responsible 
use of funds entrusted to this Department. This proposal is cost-
neutral, to be implemented with existing resources. It would not 
require additional Senior Executive Service authorizations.
    Our fiscal year 2011 budget also includes two legislative proposals 
regarding personnel authorities for OIT staff who work with the 
Veterans Health Administration. These two new authorities would 
harmonize differences that emerged when personnel were moved from VHA 
(which had its own personnel authorities under Title 38) to OIT (which 
is governed by personnel rules found in Title 5).
VA's partnership with Congress is critical to achieve transformation
    Veterans benefit from a strong partnership between VA and the 
Congress. For both the conduct of oversight and the formulation of 
legislation, open communication and collaboration is vital. In that 
spirit, I'd like to offer some cautions on legislation regarding 
transformation that is well-intentioned but could be counterproductive. 
Locking detailed and prescriptive organizational changes into the 
United States Code would be unwise, even if VA were to agree with the 
underlying concepts in the legislation. These changes are a complex 
undertaking and will require Departmental agility to adjust this 
organizational addition as we learn by implementing its principles 
along the way.
    I understand that frustration with the pace of change, especially 
for long-standing deficiencies, can lead to an urge to mandate very 
specific procedures and organizational structures. We would urge 
Congress to forego such prescriptive measures at this time while we 
undertake the efforts I've described. VA would offer instead close 
consultations with the Congress to build confidence in the Department's 
plans and hopefully demonstrate success in reforms that are underway, 
which can also be furthered under the organizational changes I'm 
advocating again today.
    We also know one legislative idea for restructuring under 
consideration would make dramatic changes in the VA's structure, by 
moving certain programs now under the Veterans Benefits Administration 
into a new fourth administration. We would counsel against such changes 
at this time, in favor of first making the essential improvements in 
the management functions described above. We see that as the first step 
in improving program performance VA-wide. Consideration of serious 
functional reorganizations, we believe, should wait until these core 
management infrastructure have been implemented. In the meantime, we 
would welcome creation of a new Assistant Secretary and the DAS 
authority on which that organization would rely.
Closing
    Again, I want to thank the Committee for inviting me here to 
discuss these issues. We depend on your counsel, and support. Together, 
we can deliver the changes we need so that VA can be an even more 
positive provider of care and benefits to our Nation's Veterans.
           ``VA to Automate its Agent Orange Claims Process''
                     Updated March 9, 2010, 1:15 PM
                       By Gregg Zoroya, USA TODAY
    WASHINGTON--The Department of Veterans Affairs plans to announce 
today that it will fully automate how it pays claims for illnesses 
related to exposure to the chemical Agent Orange to keep an 
overburdened system from collapse.
    It is the department's first effort at automating claims processing 
in its 80-year history, says VA chief technology officer Peter Levin. 
It comes as the agency struggles to cut a backlog of more than 1 
million disability claims, appeals and other cases.
    The system ``is likely to break'' if nothing is done, Levin says.
    ``Look, the bottom line is why the hell they didn't do (automation) 
30 years ago,'' says John Rowan, national president of Vietnam Veterans 
of America. ``The question is whether they will do it right.''
    VA Secretary Eric Shinseki took office last year and said no 
disability claim should take longer than four months to process. 
However, department records show that almost 40 percent take an average 
of 161 days to process and that will increase to 190 days without 
automation.
    The increase is largely the result of Shinseki's efforts to allow 
more Agent Orange disability claims.
    The military used Agent Orange to defoliate plants and trees in 
which Vietnamese insurgents hid during the Vietnam War. It was later 
shown to cause cancer, birth defects and other ailments. After years of 
debate and medical research, the VA began compensating veterans for 
illnesses linked to Agent Orange with non-taxable, monthly payments to 
those without dependents ranging from $123 to $2,673.
    In October, Shinseki added three more illness to those linked to 
the herbicide: Parkinson's disease, B-cell leukemia and heart disease. 
He told Congress this would generate another 228,000 claims in the next 
two years.
    The automated claims system will apply only to veterans filing 
these new Agent Orange claims. If it works, the VA hopes to expand 
automated claims processing through the department, says Roger Baker, 
an assistant secretary for information and technology.
    Shinseki said in a statement that veterans harmed during military 
service deserve the ``best this Nation has to offer.''
    Old, incomplete or complicated records have hampered the VA's move 
to automation, says former VA secretary James Peake, who applauded 
Shinseki's move. Many records require hands-on investigation, says 
Peake, who led the department from 2007 to 2009.
    Agent Orange cases, however, may be a good place to start, Peake 
says. Once the information from a veteran's discharge papers is entered 
into a computer, the VA can quickly verify service in Vietnam in many 
cases--a key factor in determining eligibility for Agent Orange 
benefits.

                                 
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