Department
 

Veteran Affairs
 

Audit of
 

National Contract Awards
 

at VA’s National
 

Acquisition Center
 

OFFICE OF AUDITS AND EVALUATIONS

September 2, 2011 

10-01744-265 
ACRONYMS AND ABBREVIATIONS
 

CM Contract Management 

CMOP Consolidated Mail Outpatient Pharmacy 

CO Contracting Officer 

eCMS Electronic Contract Management System 

FAR Federal Acquisition Regulation 

FSS Federal Supply Schedule 

NAC National Acquisition Center 

NCS National Contract Service 

OAL Office of Acquisition and Logistics 

OALC Office of Acquisition, Logistics, and Construction 

OIG Office of Inspector General 

PALT Procurement Action Lead Times 

VA Veterans Affairs 

To Report Suspected Wrongdoing in VA Programs and Operations:
 

Telephone: 1-800-488-8244
 

E-Mail: vaoighotline@va.gov
 

(Hotline Information: http://www.va.gov/oig/contacts/hotline.asp)
 
Report Highlights: Audit of National 

Contract Awards at VA’s National 

Acquisition Center 

Why We Did This Audit 

The Office of Inspector General assessed the 

adequacy of development, award, and 

oversight processes for national contracts 

awarded by the National Acquisition Center 

(NAC). We also assessed the extent to 

which the NAC’s National Contract Service 

accurately used the Electronic Contract 

Management System (eCMS). Procurement 

activities represent a major management 

challenge in VA, and systemic weaknesses 

reduce the effectiveness of procurement 

oversight processes. We focused on NAC 

operations because it is the largest combined 

contracting activity in VA. 

What We Found 

The Office of Acquisition and Logistics 

(OAL) needed to improve management and 

oversight controls to effectively monitor 

national contracts awarded by the NAC’s 

National Contract Service. Generally, 

contract development and award actions for 

the National Contract Service were in 

accordance with Federal and VA 

Acquisition Regulations. However, NAC 

management did not ensure staff fully 

utilized VA’s mandatory eCMS to develop 

and award national contracts. 

OAL provided limited oversight to monitor 

eCMS compliance and ensure eCMS 

capabilities adequately supported NAC 

operations. Senior officials in the Office of 

Acquisition, Logistics, and Construction 

(OALC) and NAC officials impaired and 

diminished visibility of VA procurement 

actions by not ensuring compliance with the 

mandatory use of eCMS. We also identified 

significant delays in the award of national 

contracts and found that adequate controls 

were not in place to monitor contract 

timeliness. 

What We Recommend 

We recommend the Executive Director, 

OALC, establishes controls to monitor the 

use of eCMS and the timely completion of 

the eCMS upgrade and use performance 

requirements to hold contracting officers 

accountable for using the required system. 

The Executive Director also needs to 

implement guidance that establishes timeline 

standards and controls to monitor and ensure 

contracts are awarded timely. 

Agency Comments 

The Executive Director for OALC agreed 

with our findings and recommendations and 

plans to complete all corrective actions by 

September 30, 2012. The planned actions 

are responsive to our concerns. We will 

follow up to assess the effectiveness of the 

corrective actions. Appendix D contains the 

full text of the Executive Director for OALC 

comments. 

BELINDA J. FINN
 

Assistant Inspector General
 

for Audits and Evaluations
 

i 
TABLE OF CONTENTS
 

Introduction......................................................................................................................................1
 

Results and Recommendations ........................................................................................................2
 

Finding National Contract Oversight Processes Need Improvement...............................2
 

Appendix A Background ........................................................................................................ 8
 

Appendix B Scope and Methodology................................................................................... 10
 

Appendix C Statistical Sampling Methodology................................................................... 12
 

Appendix D Executive Director for Office of Acquisition, Logistics, and Construction
 

Comments ........................................................................................................ 14
 

Appendix E OIG Contact and Staff Acknowledgments....................................................... 19
 

Appendix F Report Distribution .......................................................................................... 20
 

ii 
Audit of National Contract Awards at VA’s National Acquisition Center 

Objective 

Roles and 

Responsibilities 

National Contract 

Service 

Electronic 

Contract 

Management 

System 

INTRODUCTION 

The Office of Inspector General (OIG) conducted this audit to assess the 

adequacy of contract development, award, and oversight processes for 

national contracts awarded by the National Acquisition Center (NAC). 

The Office of Acquisition, Logistics, and Construction (OALC) is 

responsible for VA acquisition policy. OALC provides direct operational 

support to VA’s administration and staff offices through its two major 

organizational components—the Office of Acquisition and Logistics (OAL) 

and the Office of Construction and Facilities Management. OAL is 

responsible for the acquisition of goods and services supporting VA’s 

mission. The major organizational component of OAL is the NAC. The 

NAC solicits, awards, and administers VA’s Federal Supply Schedule (FSS) 

and National Contract Service (NCS) programs. 

NCS is responsible for awarding and administering national contracts. They 

also administer blanket purchase agreements, which are established under 

FSS contracts. National contracts provide standardization and drive better 

pricing terms and conditions for high usage items by providing firm 

requirements for a specific customer base. NCS is comprised of four 

branches: (1) Consolidated Mail Outpatient Pharmacy (CMOP), (2) High 

Tech Medical Equipment, (3) Medical/Surgical, and (4) Pharmaceutical. 

NCS awarded 240 national contracts with an estimated value of $4.3 billion 

from October 1, 2009, through April 5, 2010. 

The Electronic Contract Management System (eCMS) provides a centralized 

database for procurement actions and replaced a primarily manual and 

paper-based contract management operation used throughout VA. Using a 

web-based platform, it was designed to provide a fully integrated electronic 

acquisition platform that includes the seamless flow of information and data 

from all stakeholders and systems from initial requisitioning through 

closeout. The expected benefits of the system included the ability to reduce 

costs, integrate and standardize procurement processes, reduce workload, and 

improve communications. Additionally, the system creates management 

reports and improves the capability of consolidating requirements to support 

agency strategic sourcing decisions. 

Appendix A provides background information, and Appendix B describes 

our scope and methodology in conducting this audit. 

VA Office of Inspector General 1 
Audit of National Contract Awards at VA’s National Acquisition Center 

Finding 

Enforce and 

Monitor 

Mandatory Use 

of eCMS 

RESULTS AND RECOMMENDATIONS 

National Contract Oversight Processes Need 

Improvement 

OAL needs to improve management controls to effectively monitor the 

NCS’s national contract awards. Generally, contract development and award 

actions were in accordance with Federal and VA Acquisition Regulations. 

Although contracts in our sample were competitively bid, with the exception 

of two socioeconomic set asides, NAC management did not ensure staff fully 

utilized VA’s eCMS to develop and award national contracts. OAL provided 

limited oversight to monitor eCMS compliance and ensure eCMS 

capabilities adequately supported NAC operations. When contract 

information is missing or not fully completed in eCMS, it limits OAL’s and 

the NAC’s ability to effectively monitor national contracts. 

Further, NAC management did not ensure national contracts were awarded 

timely and that adequate controls were in place to monitor contract 

timeliness. We identified significant delays in the awards of national 

contracts that could prevent VA medical facilities from fully meeting VA’s 

needs when procuring key medical supplies and services. 

OAL’s Information Letter 049-07-06, dated June 15, 2007, required 

acquisition professionals who were trained and received eCMS production 

accounts to immediately accomplish all new procurement actions valued at 

$25,000 or more within eCMS. It also recommended the official contract 

file, as defined in Federal Acquisition Regulation (FAR) 4.802 and 4.803, be 

maintained solely in eCMS. 

Since eCMS is not fully utilized to develop and maintain national contracts 

at the NAC, VA cannot rely on the integrity of its procurement information 

to make acquisition decisions. We reviewed 30 national contracts with a 

total estimated value of $2.4 billion awarded by the NCS from 

October 1, 2007, through March 31, 2010. For 6 (20 percent) of 30 contracts 

in our sample, valued at about $50.3 million, contract information was not in 

eCMS. These contracts included acquisitions for high technical medical 

equipment, such as those used for magnetic resonance imaging, radiation 

therapy, diagnostic ultrasound, and nuclear imaging. 

Our review of hard copy contract files showed that generally, contract 

development and award actions were in accordance with Federal and VA 

Acquisition Regulations. However, for 22 (73 percent) of 30 contracts, 

valued at about $2.3 billion, documentation required by FAR was missing in 

eCMS. For example, eCMS did not include the solicitations, price 

VA Office of Inspector General 2 
Audit of National Contract Awards at VA’s National Acquisition Center 

negotiation memorandums, and awarded signed contracts for all national 

contracts. Specifically, we found a national contract for pharmaceutical 

products, with an estimated value of $19 million, that did not have all the 

required documentation in eCMS. eCMS was missing the acquisition plan, 

evidence of market research, and the determination of price reasonableness. 

Also, a medical and surgical national contract with an estimated value of 

$99 million was missing documentation in eCMS including the solicitation 

and price negotiation memorandum. 

OAL relies on a quarterly Procurement Action Lead Times (PALT) report, 

generated from eCMS, as a key performance measure for determining the 

percentage of contracts awarded timely. However, because the information 

in eCMS is missing or incomplete, the report does not provide an accurate 

representation of NAC’s procurement process, status, or accomplishments. 

As a result, we concluded that OAL is making procurement and/or 

performance decisions based on incomplete data that impact diverse VA 

programs. 

Contract data is entered and maintained by the contracting officers (COs) in 

the NAC’s Contract Management (CM) system, which has 17 similar data 

fields as those in eCMS. However, eCMS is the mandated acquisition 

information system, though it only serves VA customers. Other federal 

customers purchasing from VA national contracts cannot access contract 

information available in eCMS. The CM system provides an Internet 

electronic catalog function that allows federal customers to access NAC 

contract data. The CM system only includes the contract data fields, but 

eCMS maintains contract data fields along with the FAR-required contract 

documentation. 

OAL did not ensure eCMS capabilities adequately supported NAC 

operations, and although OAL mandated eCMS usage, it did not adequately 

ensure the required use of eCMS by effectively providing oversight to 

monitor eCMS compliance at the NAC. Non-compliance impairs and 

diminishes visibility of VA procurement actions. Further, it weakens the 

effectiveness of VA procurement oversight processes that rely on eCMS 

contract information. 

Currently, eCMS lacks some of the functionality required to manage and 

provide contract information for the NAC and its customers. According to 

the NAC Executive Director, neither the CM system nor eCMS offers a 

complete acquisition solution; therefore, both systems are needed. 

Regardless, reports generated from eCMS, such as the PALT, cannot be 

relied upon when making procurement decisions because the information in 

eCMS, the mandatory system, is missing or incomplete. In addition, reliance 

upon two incompatible systems creates a duplication of effort resulting in an 

inefficient use of time and resources. 

VA Office of Inspector General 3 
Audit of National Contract Awards at VA’s National Acquisition Center 

Timeliness of 

Awards Needs 

Improving 

OAL is developing an upgrade to eCMS that includes integrating the 

functions available in the CM system into eCMS making the eCMS contract 

data available to other federal customers. The upgrade was delayed from its 

initial September 2010 completion date until August 2011. Even without the 

upgrade, NAC officials need to take immediate action to ensure compliance 

with eCMS requirements. Without senior leadership’s attention to ensure 

eCMS usage and to capture VA procurement information in a reliable central 

database, VA will not achieve the improvement needed in acquisition service 

delivery from an enterprise-wide perspective. 

Office of Management and Budget Circular A-123, “Management’s 

Responsibility for Internal Controls,” dated December 21, 2004, requires 

management to establish and maintain internal controls to achieve the 

objectives of efficient operations, reliable financial reporting, and 

compliance with applicable laws and regulations. We determined OAL and 

NAC lacked an effective performance measure to monitor the timeliness of 

national contract awards. The NAC relied on CO’s performance standards 

that require contracts to be awarded in 130 days. Additionally, NCS 

Associate Directors and COs may extend the award timelines based on the 

milestones provided in the acquisition plan. The measure for timeliness 

begins from the date NCS receives the procurement request to the date of the 

award. 

The national contracts that we sampled were awarded between 55 and 

1,143 days, an average of 422 days to make an award. We found 

22 (73 percent) of 30 national contracts, valued at about $2.4 billion, were 

not awarded in 130 days or by the extended timelines. According to the 

NCS Director, the timelines are frequently adjusted in response to factors 

outside the COs’ control, such as vendor protests, awaiting a NAC Contract 

Review Board decision, and staff reassignments. In every instance identified 

in our sample where the contract award exceeded the timeliness goal, the 

NCS Director determined an acceptable reason for the delay existed. 

However, he did not provide documentation to justify his decisions, and we 

did not agree most staff reassignments were factors outside the control of 

NAC management. 

According to the NCS Director, the reason that NCS was not timely in 

awarding 6 (27 percent) of 22 national contracts, valued at about 

$16.8 million, was because the contracts were reassigned to other COs. 

Specifically, two radiation therapy contracts with estimated values of 

$3 million and $4.3 million exceeded timeliness standards by 918 and 

464 days, respectively. This delay occurred because NCS suspended award 

processing when the current COs were reassigned to expedite the awards of 

other contracts due to expire. Staffing reassignments negatively impacted 

VA Office of Inspector General 4 
Conclusion 

Audit of National Contract Awards at VA’s National Acquisition Center 

award timeliness indicating NCS management did not effectively plan or 

prioritize its workload requirements. 

OAL and NAC management did not establish timeliness standards and did 

not develop or implement guidance for awarding national contracts timely. 

Further, management did not ensure adequate controls were in place for 

monitoring contract timeliness. Instead, management evaluated award 

timeliness based on the CO’s performance standards. After we reviewed CO 

performance appraisals and interviewed the NCS Director, we determined 

COs were not being held accountable for the untimely awarding of contracts 

in our sample. Because data in eCMS was also incomplete, contracting 

milestones in eCMS were not accurate and we could not identify where 

delays occurred in the contract award. 

Establishing and providing guidance for timeliness standards would help the 

NAC properly monitor the performance of contract award actions, which 

would help ensure management’s ability to effectively plan for changes in 

staffing and the workload. It is imperative that the NAC fully utilize the 

functionality of eCMS, including its contracting milestones to facilitate 

prioritizing and planning workload to gain visibility over procurement 

actions. 

NAC management did not ensure staff fully utilized eCMS to develop and 

maintain national contracts. Although OAL mandated the use of eCMS, they 

provided limited oversight for properly monitoring compliance and ensuring 

eCMS capabilities adequately supported NAC operations. While NAC 

management stated eCMS does not provide all the functionality it needs, its 

use is still mandated. Therefore, the NAC should fully leverage the current 

functionality of eCMS, and acquisition information should be entered into 

eCMS. VA cannot achieve the transparency it needs to effectively manage 

its national acquisitions without consistently capturing acquisition 

information supporting national contracts in eCMS. Once the planned 

system upgrade is fully implemented, eCMS is expected to provide OAL 

management with the necessary acquisition data to make fully informed 

procurement decisions. 

In addition, NAC management did not ensure national contracts were 

awarded timely. OAL management did not establish guidance or effectively 

monitor contract award timeliness. Untimely national contract awards 

increases the risk for unnecessary delays in the availability of medical 

products and services. Implementing and monitoring contract award 

timeliness standards will help ensure NAC customers do not experience 

unnecessary delays in receiving products or services and allow medical 

facilities to fully leverage VA’s buying power when procuring key medical 

supplies and services. 

VA Office of Inspector General 5 
Audit of National Contract Awards at VA’s National Acquisition Center 

Recommendations 

Management 

Comments and 

OIG Response 

1.	 We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction establishes controls to monitor the use of the 

Electronic Contract Management System. 

2.	 We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction establishes performance requirements to hold 

contracting officers accountable for utilizing the required system. 

3.	 We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction establishes controls to monitor and ensure 

the timely completion of the Electronic Contract Management System 

upgrade, including the National Acquisition Center’s Contract 

Management system functions to eliminate the duplication of effort in 

data entry. 

4.	 We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction ensures the Office of Acquisition and 

Logistics implements guidance that establishes timeliness standards for 

awarding contracts. 

5.	 We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction implements controls to monitor and ensure 

contracts are awarded timely. 

The Executive Director of the OALC agreed with our findings and 

recommendations and plans to complete all corrective actions by 

September 30, 2012. NCS included eCMS performance measures in the 

fiscal year 2011 balanced scorecards. NAC management will continue to 

monitor and review monthly and quarterly reports and OALC’s Offices of 

Policy and Risk Management will perform periodic reviews throughout the 

year in support of quality control management. NCS CO performance 

standards were revised in fiscal year 2011 and include metrics to address 

award timeliness. This action was implemented after we completed our field 

work, thus we did not assess its effectiveness in improving the accountability 

for timeliness of contract actions. 

OALC plans to establish an Integrated Project Team to develop and 

implement a plan to migrate eCMS within the NAC’s CM system. NAC will 

continue to support and provide assistance to OALC and VA's Information 

Technology staff to facilitate this initiative until completed. 

Procurement Action Lead Times (PALT) were established within the OALC 

to monitor the timeliness of awarding contracts. NCS's balanced scorecard 

was updated to measure compliance with PALT and the average award times 

for NCS. However, the PALT tracks the standards from information in 

eCMS which is incomplete and therefore unreliable at the time of the audit. 

Until management enforces compliance for the mandatory use of eCMS, 

VA Office of Inspector General 6 
Audit of National Contract Awards at VA’s National Acquisition Center 

OALC and NAC management cannot benefit from the full capabilities of the 

system including the ability to use reports generated by the system. 

During the audit, the NAC relied on the CO’s performance standards to 

evaluate contract award timeliness and management told us meetings were 

held to discuss contracts that exceeded the timeliness goal. OALC’s 

response to our recommendation describes strategies to monitor timeliness. 

We noted that the contracts in our sample took an average of 422 days to 

award. Thus, we plan to follow up to assess the effectiveness of these 

strategies in future work. 

VA Office of Inspector General 7 
Audit of National Contract Awards at VA’s National Acquisition Center 

Appendix A 

VA Procurement 

Role of 

National 

Acquisition 

Center 

Federal Supply 

Schedule and 

National 

Contract 

Service 

Program 

Background 

VA is one of the largest procurement and supply agencies of the Federal 

Government with annual expenditures of more than $10.3 billion for supplies 

and services, including construction. Drugs, medical supplies and 

equipment, automated data processing equipment and services, and other 

critical patient care items must be procured and distributed to VA’s health 

care facilities comprising the largest health care delivery system in the 

country. OAL is responsible to the VA Secretary for providing goods and 

services to support the mission of VA through the Assistant Secretary for 

Acquisition, Logistics, and Construction. 

The NAC was established in 1951 as a centralized contracting unit within 

OAL. It is OAL’s major organizational component and manages the largest 

combined contracting activity within VA. It is responsible for supporting the 

health care requirements of VA and the needs of other Government agencies. 

The NAC awards high-volume contracts for recurring items used throughout 

the Federal health care system using primarily competitive negotiation. VA 

and other federal customers make purchases against these contracts by 

reviewing the NAC’s Internet Contract Catalog Search database and placing 

delivery orders for products and services available in the awarded contracts. 

These purchases result in large quantity deliveries directly from the vendor to 

VA medical centers or other government facilities. 

The NAC solicits, awards, and administers VA’s FSS and NCS programs. 

As of April 2010, the NAC was responsible for 2,058 contracts with a total 

estimated value of over $37 billion. For this total, FSS had 1,662 awarded 

contracts with a total estimated value of over $29 billion and NCS had 

396 awarded contracts with a total estimated value of over $7.9 billion. FSS 

is responsible for establishing multiple award schedule contracts that provide 

Federal agencies with a simplified process for obtaining commercial medical 

equipment, supplies, pharmaceuticals, and services. 

NCS is responsible for national contracts and blanket purchase agreements, 

which are established under FSS contracts that support national 

standardization of procurement. These programs are open to VA medical 

centers, related facilities, and some State Veterans Homes. Most of these 

contracts and agreements include other Government agencies, such as the 

Department of Defense, Indian Health Service, and Bureau of Prisons. A 

majority of the solicitations for these contracts and agreements are 

competitive, best value procurements. The performance period for these 

contracts is normally 1 year with up to 4 option years. 

Procurement activities, which include oversight practices, are a major 

management challenge and a widespread weakness in VA that reduces the 

Prior Reviews 

VA Office of Inspector General 8 
Audit of National Contract Awards at VA’s National Acquisition Center 

effectiveness of VA procurement actions. VA assessments and VA OIG 

audits, reviews, and investigations have identified nationwide and systemic 

issues. Following are some examples: 

	 VA A-123 Acquisition Assessment National Acquisition Center 

(July 20, 2010) showed that the NAC was not consistently using eCMS 

to document contract actions as required. The NAC cannot achieve the 

expected benefits of eCMS without complete document files related to 

each action being entered into the system. 

	 VA OIG American Recovery and Reinvestment Act Oversight Advisory 

Report—Non-Recurring Maintenance Contract Award Monitoring 

Processes, Report No. 09-01814-97 (March 15, 2010), revealed that 

eCMS data reliability and system problems inhibited the ability of VA’s 

OALC to effectively monitor Recovery Act procurements and to ensure 

non-recurring maintenance contract awards met Recovery Act 

requirements and accountability, efficiency, and transparency objectives. 

This issue also impacts the contracts awarded by the NAC’s NCS. 

OALC needed to work with Veterans Health Administration COs to 

promote uniformity in the usage of eCMS, improve the completeness and 

accuracy of eCMS data, and increase awareness of eCMS problems that 

affect the reliability of eCMS information. 

	 VA OIG Audit of Electronic Contract Management System, Report No. 

08-00921-181 (July 30, 2009), concluded that eCMS was not used 

effectively and procurement information in eCMS was incomplete. VA 

expends about $10 billion annually on supplies and services, and reports 

generated by the system cannot be relied upon when making procurement 

management decisions. Until management enforces compliance for the 

mandatory use of the system, VA cannot benefit from the full capabilities 

of the system, including the ability to integrate and standardize 

procurement processes, reduce workload, and improve communications. 

	 VA OIG Audit of Consolidated Mail Outpatient Pharmacy Contract 

Management, Report No. 09-00026-143 (June 10, 2009), concluded that 

strong management controls over contract development and monitoring 

will help ensure VA obtains supplies and services cost-effectively. We 

also reported that strong management controls will reduce the risk of 

contract fraud, abuse, and mismanagement. During the audit, the 

National CMOP Office issued a memorandum of understanding for 

Pharmacy Benefit Management and OALC transferring the responsibility 

for CMOP’s contracting activities and staff to the NAC, thereby, 

strengthening the oversight of the CMOP’s contract activities. 

VA Office of Inspector General 9 
Audit of National Contract Awards at VA’s National Acquisition Center 

Appendix B 

Overview 

Sampled 

National 

Contracts 

Scope and Methodology 

The scope of the audit focused on key responsibilities in the development, 

award, and oversight process of national contracts awarded by the NCS from 

October 1, 2007, through March 31, 2010. The audit team identified 

148 national contracts with an estimated value of $7.2 billion from 

information contained in the NAC’s CM system. 

We stratified the universe of national contracts by the four NCS branches. 

We placed the contracts in random number order for review. We reviewed 

30 national contracts with an estimated value of $2.4 billion. The table 

below illustrates the number of contracts reviewed in each NCS branch. 

Table 1 Total Number of National Contracts Reviewed 

NCS Branch Number of 

Contracts Contract Values 

CMOP 7 $177,789,992 

High Tech Medical 

Equipment 8 1,170,696,128 

Medical/Surgical 8 961,790,438 

Pharmaceutical 7 98,588,348 

Total 30 $2,408,864,906 

National 

Contract 

Review 

Source: The NAC’s CM data from October 1, 2007–March 31, 2010 

Our work included reviewing applicable laws, regulations, and policies and 

interviewing OAL and NAC management and COs. We analyzed key 

documentation in the procurement process for acquisition planning, 

solicitation, negotiation, and contract award by reviewing the sampled hard 

copy contract files and electronic contract files in the eCMS. 

Acquisition planning involved identifying requirements and developing a 

comprehensive statement of work clearly defining the requirements, 

deliverables, and performance measures. The solicitation identified the 

products, services, and contract terms released to the public for bid. Contract 

negotiation included reviewing bids, conducting price evaluations, and 

developing a price negotiation memorandum to ensure price reasonableness. 

The award process included announcing the award of a new contract and 

modifications to contract services or terms and conditions. 

VA Office of Inspector General 10 
Audit of National Contract Awards at VA’s National Acquisition Center 

Fraud 

Assessment 

Reliability of 

ComputerProcessed 

Data 

Compliance 

with 

Government 

Audit 

Standards 

We also assessed the extent to which the NAC accurately used eCMS. In 

addition, we reviewed whether the national contracts in our sample 

duplicated any of the existing FSS contracts. We determined if the COs’ 

warrants or authorization were appropriate for awarded contracts and if they 

met the established timelines. 

We evaluated whether the NAC and NCS organization-level performance 

measures were adequate. Specifically, we evaluated if performance goals 

accurately defined the level of performance to be achieved and contained 

performance goals that were objective, quantifiable, and measurable. Also, 

we determined if established performance indicators were used to measure 

outputs, service levels, and outcomes. 

The audit team addressed the risk that fraud, abuse, and violations of legal 

and regulatory requirements could occur. We assessed the potential for fraud 

when: 

 Contracts were not competitively bid.
 

 The statement of work was not adequate.
 

 The number of competitors was not adequate.
 

 Documentation of pre-award actions was not adequate.
 

 Analysis of cost realism and price reasonableness was not present.
 

 A review of the price negotiation memorandum was not evident.
 

 The same contractors were awarded a national and a FSS contract for the
 

same product or services. 

We determined that the reliability of computer-generated data was sufficient 

for the purpose of the audit. We identified multiple sources of information 

and data that could be used as audit evidence. We compared the information 

from the NAC’s CM system to eCMS, the Federal Procurement Data 

System-Next Generation, and contract files to determine if the data was 

accurate and reliable. Based on testing, we concluded that the information in 

eCMS was missing or incomplete, rendering it unreliable. After these tests 

and assessments, we concluded the data in the NAC’s CM system was 

sufficiently reliable to be used in meeting the audit objectives. 

We conducted audit work from March 2010 through June 2011. Our 

assessment of internal controls focused on those controls relating to the audit 

objective. We conducted this performance audit in accordance with 

generally accepted government auditing standards. These standards require 

that we plan and perform the audit to obtain sufficient, appropriate evidence 

to provide a reasonable basis for our findings and conclusions based on our 

audit objective. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objective. 

VA Office of Inspector General 11 
Audit of National Contract Awards at VA’s National Acquisition Center 

Appendix C Statistical Sampling Methodology 

Introduction We selected a random sample of awarded and active NCS contracts to assess 

the adequacy of the contract development, award, and oversight processes 

for national contracts awarded at the NAC. 

Population The contracts were identified using the NAC’s CM system. The universe 

consisted of 298 national contracts awarded and active during the period 

October 1, 2007, through March 31, 2010. The universe included contracts, 

Basic Ordering Agreements, and Blanket Purchase Agreements. 

We excluded Basic Ordering Agreements and Blanket Purchase Agreements 

from our audit universe because these were based on awarded FSS contracts 

and not national contracts. After the revision, our universe included 

148 national contracts with an estimated value of $7.2 billion. 

Figure Percentage of the OIG’s Audit Universe by NCS Branch 

CMOP 

(26%) 

High Tech 

(30%) 

Med/Surg 

(15%) 

Pharm 

(29%) 

OIG's Audit Universe - 148 Contracts 

CMOP 

38 Contracts - $206 million 

High Tech 

44 Contracts - $2.6 billion 

Med/Surg 

23 Contracts - $3.4 billion 

Pharmaceutical 

43 Contracts - $959 million 

Source: The NAC’s CM data from October 1, 2007–March 31, 2010 

Our statistician selected a stratified sample from each of the four NCS 

branches and used Random.org to place the contracts in random order in 

each of the four strata. The statistician then sorted the contracts into random 

order within each stratum. 

The statistician determined the sample size of 30 NCS contracts based on an 

error rate of 15 percent, a confidence level of 90 percent, and a desired 

margin of error for the full sample of 10 percent. 

Sample Design 

VA Office of Inspector General 12 
Audit of National Contract Awards at VA’s National Acquisition Center 

Table 2 Contract Universe and OIG Sample 

NCS Branch Contracts in 

Universe 

Contracts in 

Sample 

Percentage 

of Universe 

Reviewed 

Value of 

Contracts in 

Universe 

CMOP 38 7 18 $206,218,871 

High Tech Medical 

Equipment 44 8 18 2,569,802,059 

Medical/Surgical 23 8 35 3,456,044,192 

Pharmaceutical 43 7 16 958,846,714 

Total 148 30 20 $7,190,911,836 

Source: The NAC’s CM data from October 1, 2007–March 31, 2010 

VA Office of Inspector General 13 
Audit of National Contract Awards at VA’s National Acquisition Center 

Appendix D Executive Director for Office of Acquisition, Logistics, 

and Construction Comments 

Department of Memorandum Veterans Affairs 

Date: August 4, 2011 

From: Executive Director, Office of Acquisition, Logistics, and Construction (001ALC) 

Subj: OIG Draft Report, Audit of the National Contract Awards at VA’s National 

Acquisition Center (Project No. 2010-01744-R4-0261, Issued June 15, 2011) 

To: Assistant Inspector General for Audits and Evaluations (52) 

1. Office of Acquisition, Logistics, and Construction (OALC) has reviewed the draft 

report, Audit of the National Contract Awards at VA’s National Acquisition Center 

(NAC), and concurs with OIG’s recommendations to OALC. 

2. If you have questions regarding this submission, please contact one of the 

following, Craig Robison, Executive Director, NAC, 708-786-5157 or Ruby B. 

Harvey, Director, Enterprise Acquisition Systems Services, 240-439-6539. 

Attachment 

VA Office of Inspector General 14 
Audit of National Contract Awards at VA’s National Acquisition Center 

OFFICE OF ACQUISTION, LOGISTICS, AND CONSTRUCTIONS (OALC) 

Action Plan 

OIG Draft Report, Audit of the National Contract Awards at VA’s National 

Acquisition Center (VAIQ7126287) 

Date of Draft Report: June 15, 2011 

Recommendations/Status Actions	 Completion Date 

Recommendation 1. We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction establishes controls to monitor the use of the Electronic 

Contract Management System. 

OALC Comments 

Concur 

National Contract Service, within NAC, implemented a strategy to address this issue: 

a.	 National Contract Service’s balanced scorecard added the following measures and 

thresholds in its fiscal year (FY) 2011 update: 

1)	 All new procurements valued at the micro-purchase level (currently $3,000) or more are 

accomplished in the Electronic Contract Management System (eCMS). (Threshold 

90 percent) 

2)	 Fields are accurately completed in the data values tab of eCMS. (Threshold 90 percent) 

3)	 Required documents (Price Negotiation Memorandum, solicitation, etc.) are filed in 

eCMS. (Threshold 90 percent) 

4)	 Attachments in the eCMS briefcase are named in accordance with appropriate 

conventions. (Threshold 90 percent) 

5)	 All contracts with expiration date of 2010 or later are entered into eCMS. (Threshold 

90 percent) 

This is a work in progress. One contract is reviewed per contracting officer per quarter by 

the employee’s supervisor for compliance with 1), 4), and 5) above. NAC formed a 

workgroup which is defining the requirements for 2) and 3). As soon as those requirements 

are published, elements 2) and 3) will also be reviewed. The target date for completion is 

FY 2011, Quarter 4. 

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Audit of National Contract Awards at VA’s National Acquisition Center 

b.	 OALC also established eCMS data parameters and reporting mechanisms in support of data 

value completion and input requirements. Monthly reports are pulled and compared to 

identify compliance with eCMS data entry. NAC management will continue to monitor 

and review monthly and quarterly reports provided by the Service in addition to other 

outside reviews, audits, and findings. Continuous monitoring will be performed. Periodic 

review of the mechanisms in place will be performed and enhancements made, if 

necessary. 

OALC Offices of Policy and Risk Management are responsible for establishing auditing 

controls in support of quality assurance/quality control management and perform periodic 

reviews throughout the year. 

In Progress	 September 30, 2011 

Recommendation 2. We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction establishes performance requirements to hold contracting 

officers accountable for utilizing the required system. 

OALC Comments 

Concur 

OALC’s Office of Policy is responsible for implementing performance requirements in support 

of accountability and standardized departmental practices. Performance standards were revised 

in FY 2011 for contracting officers within National Contract Service to include the entire 

balanced scorecard measures listed above in a critical element. 

Timeliness of contract awards will be addressed in each contract specialist and manager’s 

performance assessment. Overall rating will be affected by employee’s accomplishment or lack 

of in this area. We will work with our Human Resource Management staff to ensure the 

appropriate rating is reflected and appropriate corrective actions, if required, are followed. 

Completed 

Recommendation 3. We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction establishes controls to monitor and ensure the timely 

completion of the Electronic Contract Management System upgrade, including the 

National Acquisition Center’s Contract Management system functions to eliminate the 

duplication of effort in data entry. 

OALC Comments 

Concur 

NAC’s Contract Management system may appear to be duplicative on the surface since both 

contain general award information; however NAC’s Contract Management system contains 

VA Office of Inspector General 16 
Audit of National Contract Awards at VA’s National Acquisition Center 

more intuitive information data and processes, which calculates sales, revenue, identifies 

delinquencies, etc., than the eCMS. OALC must comply with VA’s Project Management 

Accountability System (PMAS) requirements; thus the process to migrate NAC’s system within 

the eCMS requires establishment of an Integrated Project Team (IPT) to develop and implement 

the migration plan. OALC staff has been diligently working this initiative for the past 

18 months. NAC continues to support and provide assistance to OALC and VA’s Information 

Technology staff to facilitate this initiative to fruition. Anticipated completion is planned for 

September 2012. 

In Progress	 September 30, 2012 

Recommendation 4. We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction ensures the Office of Acquisition and Logistics implements 

guidance that establishes timeliness standards for awarding contracts. 

OALC Comments 

Concur 

Procurement Action Lead Times (PALT) were established top down within the OALC. NAC’s 

National Contract Service implemented three strategies to address this issue. These strategies 

were already in place at the time of the audit. 

1.	 A monthly “quick pulse” report is forwarded through NAC’s Executive Director to the 

office of the Deputy Assistant Secretary for Acquisition and Logistics. The report 

includes the number of contracts awarded and Blanket Purchase Agreements (BPA) 

established and whether they were awarded or established timely. 

2.	 National Contract Service’s balanced scorecard was updated to measure compliance with 

PALT and average time to award contracts for the Medical/Surgical Branch and 

Pharmaceutical Branch, two of the four Branches within National Contract Service. The 

Consolidated Mail Outpatient Pharmacy Branch was recently added to the Service and 

compliance with these two measures began in FY 2010, Quarter 2. In FY 2010 Quarter 

4, these same two measures were added for the High Tech Medical Equipment (HTME) 

Branch, completing the process. The threshold for meeting PALT is currently set at 

70 percent. 

3.	 Performance standards for contracting officers within National Contract Service include 

an evaluation of awarding contracts or establishing BPAs in compliance with PALT 

under a critical element. This performance standard was in place at the time of the OIG 

audit. The National Contract Service was monitoring contract timeliness during the 

period of the audit. The Service’s Task List, a report generated by each branch the 1st 

and 3rd Friday of each month, was provided to the OIG auditors for their review. The 

task list has a record of each procurement in progress for each branch of the service, 

including the date the action started, date completed and a narrative status report. This 

data is used for balanced scorecard reporting and also to generate a report for the 

VA Office of Inspector General 17 
Audit of National Contract Awards at VA’s National Acquisition Center 

Assistant Directors, which lists each contracting officer and their compliance with 

meeting PALT (and other measures) and is used for the performance evaluation process. 

The balanced scorecard, performance standards, and PALT reports provided to the 

Assistant Directors, and other performance measures were shared with the OIG auditors 

at the time of the audit. 

Completed 

Recommendation 5. We recommend the Executive Director for the Office of Acquisition, 

Logistics, and Construction implements controls to monitor and ensure contracts are 

awarded timely. 

OALC Comments 

Concur 

The eCMS contains award date data values for metric reporting. Under eCMS system, managers 

have the ability to monitor and measure contract award timeliness by viewing the milestones 

section within the contract file. Monitoring is accomplished on a monthly basis within each 

branch, with reports made to the Director of each NAC Service. Also each contract specialist 

has a performance metric contained in their performance plans that addresses contract awards 

and timeliness. 

Since the audit was performed National Contract Service has begun to use eCMS fully and has 

learned to pull various reports to better monitor contract awards, accomplishments and to update 

milestones, when warranted. 

Completed 

VA Office of Inspector General 18 
Audit of National Contract Awards at VA’s National Acquisition Center 

Appendix E OIG Contact and Staff Acknowledgments
 

OIG Contact	 For more information about this report, please 

contact the Office of Inspector General at 

(202) 461-4720. 

Acknowledgments	 Cherie Palmer, Director 

Ronald Comtois 

Kevin Gibbons 

Lee Giesbrecht 

Theresa Golson 

Cynnde Nielsen 

John Pawlik 

Jennifer Roberts 

Herman Woo 

Ora Young 

VA Office of Inspector General 19 
Audit of National Contract Awards at VA’s National Acquisition Center 

Appendix F Report Distribution 

VA Distribution 

Office of the Secretary
 

Veterans Health Administration
 

Veterans Benefits Administration
 

National Cemetery Administration
 

Assistant Secretaries
 

Office of General Counsel
 

Non-VA Distribution 

House Committee on Veterans’ Affairs 

House Appropriations Subcommittee on Military Construction, Veterans 

Affairs, and Related Agencies 

House Committee on Oversight and Government Reform 

Senate Committee on Veterans’ Affairs 

Senate Appropriations Subcommittee on Military Construction, Veterans 

Affairs, and Related Agencies 

Senate Committee on Homeland Security and Governmental Affairs 

National Veterans Service Organizations 

Government Accountability Office 

Office of Management and Budget 

This report will be available in the near future on the OIG’s Web site at 

http://www.va.gov/oig/publications/reports-list.asp. This report will remain 

on the OIG Web site for at least 2 fiscal years. 

VA Office of Inspector General 20