99–006

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 107–600

VETERANS HEALTH CARE AND PROCUREMENT

IMPROVEMENT ACT OF 2002

JULY 22, 2002.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Mr. SMITH of New Jersey, from the Committee on Veterans’ Affairs,

submitted the following

R E P O R T

[To accompany H.R. 3645]

[Including cost estimate of the Congressional Budget Office]

The Committee on Veterans’ Affairs, to whom was referred the

bill (H.R. 3645) to amend title 38, United States Code, to provide

for improved procurement practices by the Department of Veterans

Affairs in procuring health-care items, having considered the same,

reports favorably thereon with an amendment and recommends

that the bill as amended do pass.

The amendment is as follows:

Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Veterans Health Care and Procurement Improvement Act of 2002’’.

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. References to title 38, United States Code.

Sec. 3. Limitation on use of local contracts for Department of Veterans Affairs procurement of health-care items.

Sec. 4. Enhancements to enhanced-use lease authority.

Sec. 5. Eligibility for Department of Veterans Affairs health care of certain additional Filipino World War II

veterans residing in the United States.

Sec. 6. Outpatient dental care for all former prisoners of war.

Sec. 7. Improved accountability of research corporations established at Department of Veterans Affairs medical

centers.

Sec. 8. Department of Defense participation in Revolving Supply Fund purchases.

Sec. 9. Name of Department of Veterans Affairs outpatient clinic, New London, Connecticut.

SEC. 2. REFERENCES TO TITLE 38, UNITED STATES CODE.

Except as otherwise expressly provided, whenever in this Act an amendment or

repeal is expressed in terms of an amendment to, or repeal of, a section or other

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provision, the reference shall be considered to be made to a section or other provision of title 38, United States Code.

SEC. 3. LIMITATION ON USE OF LOCAL CONTRACTS FOR DEPARTMENT OF VETERANS AFFAIRS PROCUREMENT OF HEALTH-CARE ITEMS.

(a) IN GENERAL.—Section 8125 is amended to read as follows:

‘‘§ 8125. Procurement of health-care items

‘‘(a) Except as provided in subsection (b), any procurement of a health-care item

by the Department shall be made through the use of a Federal Supply Schedule contract, or a national contract, that meets the requirements of subsection (d). ‘‘(b)(1) Subsection (a) does not apply to a procurement of a health-care item in any

of the following cases: ‘‘(A) A procurement that is necessary to meet a current or near-term medical

emergency at a medical center. ‘‘(B) A procurement that is for a health-care item that is not listed in the Federal Supply Schedule or as part of a national contract and for which there is

a valid clinical need. ‘‘(C) A procurement that is for a specialized health-care item not listed in the

Federal Supply Schedule or as part of a national contract and that is to meet

the special needs of an individual patient who has one of the special needs identified in section 1706(b) of this title and who has a valid clinical need for the

item. ‘‘(D) A procurement that is part of an approved sharing agreement between

the Department of Defense and the Department of Veterans Affairs with demonstrable cost-per-item savings for a health-care item listed on the Federal

Supply Schedule or a national contract. ‘‘(E) A procurement that supports a prime contract or a subcontract with a

small business concern qualifying for a procurement preference program under

section 8 or 15 of the Small Business Act (15 U.S.C. 637, 644), if the cost of

the item to be procured is no more than the cost (taking price and value into

consideration) of the comparable item on the Federal Supply Schedule or national contract and if the item meets the requirements of subsections (d)(1)(A)

and (d)(2).

‘‘(2) A procurement may be made as authorized under subparagraph (B) of paragraph (1) only if the procurement is specifically authorized in advance in writing

by the Secretary. The authority of the Secretary under the preceding sentence may

only be delegated to the Deputy Secretary or to an official of the Veterans Health

Administration not below the level of a Deputy Under Secretary (or equivalent) acting jointly with a procurement executive of the Department not below the level of

an Associate Deputy Assistant Secretary.

‘‘(c) In the case of an emergency procurement of a health-care item as authorized

by subsection (b)(1)(A), the quantity of the item procured may not exceed the quantity of that item that is the reasonably foreseeable need for the item at the medical

center concerned until resupply can be achieved through procurement actions other

than emergency procurement.

‘‘(d) A contract meets the requirements of this subsection if—

‘‘(1) the contract includes—

‘‘(A) provisions referred to as ‘preaward and postaward audit clauses’; and

‘‘(B) a provision referred to as a ‘price reduction clause’; and

‘‘(2) in the case of a contract to be made with a vendor that is a distributor,

the contract will be for distribution services only unless the manufacturer of the

product can clearly demonstrate that at least 60 percent of its sales of the item

through that vendor is to commercial customers with negotiated product prices

and that the vendor actually stocks and distributes the product.

‘‘(e)(1) The Secretary shall establish procedures to assure compliance by each Department medical facility with the provisions of this section and with applicable

Federal and Department procurement regulations.

‘‘(2) The procedures established by the Secretary under paragraph (1) shall be designed to maximize health-care item variety and the use of the Federal Supply

Schedule.

‘‘(3) The Secretary shall establish and enforce procedures limiting the standardization of items at the local, regional, or national level to provide special patient populations (as identified in section 1706(b) of this title) with the range and types of

health-care items required to meet their clinical and quality-of-life needs.

‘‘(4) The Advisory Committee on Prosthetics and Special-Disabilities Programs established under section 543 of this title shall review the procedures established

under paragraph (3), including the implementation of those procedures, and shall

advise the Secretary when those procedures are not effectively enforced by the Department.

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‘‘(f)(1) The Secretary shall establish annual goals for Department medical centers

for the purchase of health-care items from Federal Supply Schedule and national

contracts meeting the requirements of subsection (d). Such goals shall be designed

to maximize the percentage of such purchases that are made through such contracts.

‘‘(2) The Secretary shall establish goals for the Department for procurements from

small business concerns qualifying for a procurement preference program under section 8 or 15 of the Small Business Act (15 U.S.C. 637, 644). Such goals shall be no

less than the national goal for each such procurement preference program under either of those sections.

‘‘(3) Achievement of the goals established under this subsection shall be an element in the performance standards for employees of the Department who have the

authority and responsibility for achieving those goals.

‘‘(g) A provision of law that is inconsistent with any provision of this section shall

not apply, to the extent of the inconsistency, to the procurement of a healthcare

item for the Department.

‘‘(h)(1) Not later than December 31 each year, the Secretary shall submit to the

Committees on Veterans’ Affairs of the Senate and House of Representatives a report on the procurement of health-care items during the preceding fiscal year. Each

such report shall include, for the year covered by the report, the following:

‘‘(A) The total dollar amount of all items listed in Federal Supply Classification (FSC) Group 65 or 66 and the total dollar value of the exceptions to subsection (a) under each of subparagraphs (A), (B), (C), (D), and (E) of subsection

(b)(1), shown by medical facility.

‘‘(B) A detailed explanation for exceptions to subsection (a), including—

‘‘(i) the rationale for use of emergency procurement at Department medical facilities;

‘‘(ii) the rationale for approval of requests under subsection (b)(1)(B) for

procurement of items not listed on the Federal Supply Schedule or on national contracts; and

‘‘(iii) exceptions granted for special health-care needs of veterans with disabilities described in section 1706(b) of this title.

‘‘(C) Analysis of sharing agreements between the Department and the Department of Defense to indicate the basic written sharing initiative and the division

of financial responsibility between the two Departments.

‘‘(D) The stated goal under each procurement preference program, together

with an assessment of the performance of the Department toward achievement

of that goal, especially with respect to the goal for contracting with businesses

that are owned by veterans with service-connected disabilities.

‘‘(2) The Advisory Committee on Prosthetics and Special- Disabilities Programs of

the Department shall submit comments on each report under paragraph (1) before

the report is submitted under that paragraph, and the Secretary shall include those

comments in the report as submitted.

‘‘(i) For the purposes of this subsection:

‘‘(1) The term ‘health-care item’ includes any item listed in, or (as determined

by the Secretary) of the same nature as an item listed in, Federal Supply Classification (FSC) Group 65 or 66.

‘‘(2) The term ‘national contract’ means a contract for procurement of an item

that is entered into by the National Acquisition Center of the Department or

another Department procurement activity, as authorized by the Secretary, that

is available for use by all Department medical facilities.

‘‘(3) The term ‘valid clinical need’ means in the professional judgment of an

appropriate clinician. Such term applies to health care items, prosthetic appliances, sensory or mobility aids and supplies that are prescribed by a physician

for special patient populations such as veterans with spinal cord dysfunction,

blindness, amputations, and other veterans included in section 1706(b) of this

title.

‘‘(4) The term ‘Federal Supply Schedule contract’ means a contract that is

awarded and administered by the National Acquisition Center of the Department under a delegation of authority from the Administrator of the General

Services Administration.

‘‘(5) The term ‘emergency procurement’ means a procurement necessary to

meet an emergency need affecting the health or safety of a person being furnished health-care services by the Department.’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall take effect on

September 30, 2003, and shall apply to procurements by the Secretary of Veterans

Affairs after that date.

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SEC. 4. ENHANCEMENTS TO ENHANCED-USE LEASE AUTHORITY.

(a) INCREASED FLEXIBILITY UNDER ENHANCED-USE LEASES.—Section 8162(a)(2)(B)

is amended— (1) by striking ‘‘proposed by the Under Secretary for Health’’ and inserting ‘‘proposed by one of the Under Secretaries’’; and

(2) by striking ‘‘to the provision of medical care and services’’ and inserting ‘‘to the programs and activities of the Department’’. (b) NOTIFICATION OF PROPERTY TO BE LEASED.—Section 8163 is amended— (1) in the first sentence of subsection (a)— (A) by striking ‘‘designate a property to be leased under an enhanceduse

lease’’ and inserting ‘‘enter into an enhanced-use lease with respect to certain property’’; and

(B) by striking ‘‘before making the designation’’ and inserting ‘‘before entering into the lease’’;

(2) in subsection (b), by striking ‘‘of the proposed designation’’ and inserting ‘‘to the congressional veterans’ affairs committees and to the public of the proposed lease’’; and

(3) in subsection (c)— (A) in paragraph (1)— (i) by striking ‘‘designate the property involved’’ and inserting ‘‘enter

into an enhanced-use lease of the property involved’’; and

(ii) by striking ‘‘to so designate the property’’ and inserting ‘‘to enter

into such lease’’;

(B) in paragraph (2), by striking ‘‘90-day period’’ and inserting ‘‘45–day

period’’;

(C) in paragraph (3)— (i) by striking ‘‘general description’’ in subparagraph (D) and inserting ‘‘description of the provisions’’; and

(ii) by adding at the end the following new subparagraph: ‘‘(G) A summary of a cost-benefit analysis of the proposed lease.’’; and

(D) by striking paragraph (4).

(c) DISPOSITION OF LEASED PROPERTY.—Section 8164 is amended— (1) in subsection (a)— (A) by striking ‘‘by requesting the Administrator of General Services to

dispose of the property pursuant to subsection (b)’’ in the first sentence; and

(B) by striking the third sentence;

(2) in subsection (b)— (A) by striking ‘‘Secretary and the Administrator of General Services

jointly determine’’ and inserting ‘‘Secretary determines’’; and

(B) by striking ‘‘Secretary and the Administrator consider’’ and inserting ‘‘Secretary considers’’; and

(3) in subsection (c), by striking ‘‘90 days’’ and inserting ‘‘45 days’’. (d) USE OF PROCEEDS.—Section 8165 is amended— (1) in subsection (a)— (A) by striking ‘‘(1)’’ after ‘‘(a)’’;

(B) by inserting after ‘‘of this title’’ the following: ‘‘, except that any funds

received by the Department under an enhanced-use lease in support of the

Veterans Benefits Administration or the National Cemetery Administration

and remaining after any deduction from such funds under subsection (b)

shall be credited to applicable appropriations of that Administration’’; and

(C) by striking paragraph (2);

(2) in subsection (b), by adding at the end the following new sentence: ‘‘The

Secretary may use the proceeds from any enhanced-use lease to reimburse applicable appropriations of the Department for any expenses incurred in the development of additional enhanced-use leases.’’; and

(3) by striking subsection (c).

(e) CLERICAL AMENDMENTS.—(1) The heading of section 8163 is amended to read

as follows:

‘‘§ 8163. Hearing and notice requirements regarding proposed leases’’.

(2) The item relating to section 8163 in the table of sections at the beginning of

chapter 81 is amended to read as follows:

‘‘8163. Hearing and notice requirements regarding proposed leases.’’.

SEC. 5. ELIGIBILITY FOR DEPARTMENT OF VETERANS AFFAIRS

HEALTH CARE OF CERTAIN ADDITIONAL FILIPINO WORLD

WAR II VETERANS RESIDING IN THE UNITED STATES.

(a) ELIGIBILITY FOR HEALTH CARE.—The text of section 1734 is amended to read

as follows:

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‘‘(a) The Secretary shall furnish hospital and nursing home care and medical services to any individual described in subsection (b) in the same manner, and subject

to the same terms and conditions, as apply to the furnishing of such care and services to individuals who are veterans as defined in section 101(2) of this title. Any

disability of an individual described in subsection (b) that is a service-connected disability for purposes of this subchapter (as provided for under section 1735(2) of this

title) shall be considered to be a service-connected disability for purposes of furnishing care and services under the preceding sentence. ‘‘(b) Subsection (a) applies to any individual who is a Commonwealth Army veteran or new Philippine Scout and who— ‘‘(1) is residing in the United States; and

‘‘(2) is a citizen of the United States or an alien lawfully admitted to the

United States for permanent residence.’’. (b) LIMITATION.—The amendment made by subsection (a) shall take effect on the

date on which the Secretary of Veterans Affairs submits to the Committees on Veterans’ Affairs of the Senate and House of Representatives and publishes in the Federal Register a certification that sufficient resources are available for the fiscal year

during which the certification is submitted to carry out section 1734 of title 38,

United States Code, as amended by such amendment, during that fiscal year at

those facilities of the Department of Veterans Affairs where the majority of veterans

described in subsection (b) of such section will receive hospital and nursing home

care and medical services authorized by subsection (a) of such section.

SEC. 6. OUTPATIENT DENTAL CARE FOR ALL FORMER PRISONERS OF WAR.

Section 1712(a)(1)(F) is amended by striking ‘‘and who was detained or interned

for a period of not less than 90 days’’.

SEC. 7. IMPROVED ACCOUNTABILITY OF RESEARCH CORPORATIONS ESTABLISHED AT DEPARTMENT OF VETERANS AFFAIRS MEDICAL CENTERS.

(a) AUDITS AND IMPROVED ANNUAL REPORT.—Subsection (b) of section 7366 is

amended to read as follows: ‘‘(b)(1) Not later than March 1 each year, each such corporation shall submit to

the Secretary a report concerning the preceding calendar year. Each such annual

report shall include the following:

‘‘(A) A detailed statement of the corporation’s operations, activities, and accomplishments during the preceding calendar year.

‘‘(B) A description of each research project or activity for which funds were

provided by the corporation during that year or for which funds were provided

by the corporation during a preceding year and that is ongoing during the year

covered by the report, including, for each such project or activity, the title of

the project or activity and a description of the purpose of the project or activity.

‘‘(C) A statement of the amount of funds controlled by the corporation as of

the first day, and as of the last day, of the year covered by the report and a

statement of the amount of funds received, shown by source, during the year.

‘‘(D) An itemized accounting of all disbursements made during the year.

‘‘(E) The most recent audit of the corporation under paragraph (2).

‘‘(F) Such other information as may be necessary to enable the Secretary to

prepare the annual report to congressional committees required under section

7367 of this title.

‘‘(2) A corporation with a balance of funds under its control in excess of $300,000

at any time during a calendar year shall obtain an audit of the corporation for that

year. Any other corporation shall obtain an independent audit of the corporation at

least once every three years. The report on any such audit shall specifically state

whether the corporation audited made any payment, or provided any travel, during

the period covered by the audit to a member of the board of directors of the corporation and, if so, the amount and recipient of any such payment or travel.

‘‘(3) Any audit under paragraph (2) shall be performed by an independent auditor

and shall be performed in accordance with generally accepted Government auditing

standards and in accordance with Office of Management and Budget Circular A–

133.

‘‘(4) The Inspector General of the Department shall each year review the most recent audit under paragraph (2) of not less than 10 percent of the corporations described in the first sentence of paragraph (2) and not less than 10 percent of the

corporations described in the second sentence of that paragraph. As part of such review, the Inspector General shall determine whether the audit was carried out in

accordance with generally accepted Government auditing standards, as required by

paragraph (3).’’.

(b) ANNUAL REPORT OF SECRETARY.—(1) Subchapter IV of chapter 73 is

amended—

(A) by inserting after subsection (c) of section 7366 the following:

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‘‘§ 7367. Annual report to congressional committees’’; and

(B) in the text immediately following the section heading inserted by subparagraph (A)—

(i) by striking ‘‘(d)’’ and inserting ‘‘(a)’’;

(ii) by inserting after the first sentence the following new sentence: ‘‘Each such report shall be based on the annual reports submitted by

the corporations to the Secretary under section 7366(b) of this title and

shall be submitted not later than May 1 of the year following the year

covered by such reports.’’; and

(iii) by striking ‘‘The report shall’’ and inserting the following: ‘‘(b) Each such report shall’’. (2) The table of sections at the beginning of such chapter is amended by inserting

after the item relating to section 7366 the following new item:

‘‘7367. Annual report to congressional committees.’’.

(c) EXTENSION OF AUTHORITY TO ESTABLISH RESEARCH CORPORATIONS.—Section 7368 is amended by striking ‘‘December 31, 2003’’ and inserting ‘‘December 31, 2006’’.

SEC. 8. DEPARTMENT OF DEFENSE PARTICIPATION IN REVOLVING SUPPLY FUND PURCHASES.

(a) ENHANCEMENT OF DEPARTMENT OF DEFENSE PARTICIPATION.—Section 8121 is

amended— (1) by redesignating subsection (b) and (c) as subsections (d) and (e), respectively;

(2) by designating the last sentence of subsection (a) as subsection (c); and

(3) by inserting after paragraph (3) of subsection (a) the following new subsection: ‘‘(b) The Secretary may authorize the Secretary of Defense to make purchases

through the fund in the same manner as activities of the Department. When services, equipment, or supplies are furnished to the Secretary of Defense through the

fund, the reimbursement required by paragraph (2) of subsection (a) shall be made

from appropriations made to the Department of Defense, and when services or supplies are to be furnished to the Department of Defense, the fund may be credited,

as provided in paragraph (3) of subsection (a), with advances from appropriations

available to the Department of Defense.’’. (b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply only

with respect to funds appropriated for a fiscal year after fiscal year 2002.

SEC. 9. NAME OF DEPARTMENT OF VETERANS AFFAIRS OUTPATIENT CLINIC, NEW LONDON,

CONNECTICUT.

The Department of Veterans Affairs outpatient clinic located in New London, Connecticut, shall after the date of the enactment of this Act be known and designated

as the ‘‘John J. McGuirk Department of Veterans Affairs Outpatient Clinic’’. Any

reference to such outpatient clinic in any law, regulation, map, document, record,

or other paper of the United States shall be considered to be a reference to the John

J. McGuirk Department of Veterans Affairs Outpatient Clinic.

INTRODUCTION

H.R. 3645, the Veterans Health Care and Procurement Improvement Act of 2002, addresses issues raised by the Committee in

hearings, meetings, and through other oversight mechanisms during the course of this Congress.

On May 16, 2002, the Subcommittees on Oversight and Investigations and Health held a joint hearing on VA Research Corporations. Witnesses who appeared before the subcommittees included

Mr. Michael Slachta, Jr., Assistant Inspector General for Audit,

Department of Veterans Affairs, accompanied by Mr. John

Bilobran, Deputy Assistant Inspector General for Audit, and Dr.

John Mather, Chief Officer, Office of Research Compliance and Assurance; the Honorable Robert H. Roswell, M.D., Under Secretary

for Health, Veterans Health Administration, Department of Veterans Affairs, accompanied by the Honorable Tim S. McClain, General Counsel, John R. Feussner, M.D., Chief Research and Development Officer, and Mindy Aisen, M.D., Director of Rehabilitation ReVerDate 11-MAY-2000 04:02 Jul 24, 2002 Jkt 010199 PO 00000 Frm 00006 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR600.107 txed01 PsN: txed01
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search and Development; Mr. Antonio Laracuente, Chairman, National Association of Veterans’ Research and Education Foundations and Executive Director, Atlanta Research and Education

Foundation; Franklin Zieve, M.D., Ph.D., President, McGuire Research Institute, Inc.; Mr. Ken Hickman, Executive Director, Brentwood Biomedical Research Institute; and Wendy Baldwin, M.D.,

Deputy Director for Extramural Research, National Institutes for

Health. Written testimonies were received from Mr. James R.

Fischl, Director of the National Veterans Affairs and Rehabilitation

Commission, The American Legion; Ms. Joy J. Ilem, Assistant National Legislative Director, Disabled American Veterans; and Mr.

Richard B. Fuller, National Legislative Director, Paralyzed Veterans of America.

On June 13, 2002, the Subcommittee on Health held a hearing

on the health care of Filipino World War II veterans within the Department of Veterans Affairs. Witnesses who appeared before the

subcommittee included His Excellency Albert Del Rosario, Ambassador to the United States, Embassy of the Philippines; the Honorable Anthony J. Principi, Secretary, Department of Veterans Affairs, accompanied by Mr. John H. Thompson, Deputy General

Counsel; the Honorable Benjamin Gilman, Member of Congress

from the State of New York; the Honorable Randy ‘‘Duke’’ Cunningham, Member of Congress from the State of California; the

Honorable Dana Rohrabacher, Member of Congress from the State

of California; the Honorable Patsy T. Mink, Member of Congress

from the State of Hawaii; the Honorable Juanita Millender-McDonald, Member of Congress from the State of California; the Honorable Robert A. Underwood, Member of Congress from the Territory

of Guam; Mr. Lou Diamond Phillips, actor and Filipino veterans activist, Los Angeles, California; Mr. Fritz Friedman, Chair, Assembly for Justice, Los Angeles, California; Mr. Resty Supnet, President, Filipino World War II Veterans Foundation of San Diego

County, accompanied by Mr. Romy Monteyro; Mr. Patrick Ganio,

President, American Coalition for Filipino Veterans; Ms. Susan

Espiritu Maquindang, Executive Director, Filipino-American Service Group; Ms. Lourdes Santos Tancinco, President, San Francisco

Veterans Equity Center; Ms. Joy J. Ilem, Assistant National Legislative Director, Disabled American Veterans; Mr. Richard

Weidman, Director of Government Relations, Vietnam Veterans of

America; and Mr. James Fischl, Director of National Veterans Affairs and Rehabilitation Commission, The American Legion. Written testimonies were received from the Honorable Barbara Boxer,

United States Senator from the State of California; the Honorable

Barbara Lee, Member of Congress from the State of California; the

Honorable Nancy Pelosi, Member of Congress from the State of

California; the Honorable Maxine Waters, Member of Congress

from the State of California; General Tagumpay Nanadiego,

Former Special Presidential Representative, Embassy of the Philippines; Ms. Wendy Lawrence, Associate Director, National Legislative Service, Veterans of Foreign Wars; and Mr. Richard Jones, National Legislative Director, AMVETS.

On June 26, 2002, the Subcommittee on Health held a legislative

hearing to consider H.R. 3645, the Veterans Health Care Items

Procurement Reform and Improvement Act of 2002. Witnesses who

appeared before the subcommittee included Mr. Mark Catlett, PrinVerDate 11-MAY-2000 04:02 Jul 24, 2002 Jkt 010199 PO 00000 Frm 00007 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR600.107 txed01 PsN: txed01
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cipal Deputy Assistant Secretary for Management, Department of

Veterans Affairs, accompanied by Mr. Gary Krump, Deputy Assistant Secretary for Acquisition and Materiel Management, and Ms.

Phillipa Anderson, Assistant General Counsel; Ms. Cynthia A.

Bascetta, Director, Health Care-Veterans’ Health and Benefits

Issues, General Accounting Office; Mr. John S. Bilobran, Deputy

Assistant Inspector General for Auditing, Department of Veterans

Affairs, accompanied by Ms. Maureen T. Regan, Counselor to the

Inspector General. Written testimonies were received from Mr.

Terry Baker, Executive Director of Veterans Aimed Toward Awareness, Allied Health for Veterans Care; Mr. David Gorman, Executive Director, Disabled American Veterans; Mr. Paul A. Hayden,

Deputy Director, National Legislative Service, Veterans of Foreign

Wars of the United States; Mr. John F. Sommer, Jr., Executive Director, The American Legion; Mr. Richard B. Fuller, National Legislative Director, Paralyzed Veterans of America; Mr. Richard

Weidman, Director of Government Relations, Vietnam Veterans of

America; and Mr. Thomas H. Miller, Executive Director, Blinded

Veterans Association.

On July 12, 2002, the Subcommittee on Health met and unanimously ordered H.R. 3645, with an amendment in the nature of a

substitute, reported favorably to the full Committee.

On July 16, 2002, the full Committee met and ordered H.R. 3645,

with an amendment in the nature of a substitute, reported favorably to the House by voice vote.

SUMMARY OF THE REPORTED BILL

H.R. 3645, as amended, would:

1. Provide reform of Department of Veterans Affairs (VA) programs and policies regarding procurement of certain health

care items used by the VA to care for veterans by requiring

increased use of the Federal Supply Schedule or national contracts, with improved accountability and strengthened reporting for exceptions made to the reformed policies.

2. Streamline the procedures that govern the VA’s use of enhanced-use lease authority; provide the VA additional flexibility to enhance use of VA properties in complementary activities.

3. Provide hospital and nursing home care and medical services

to certain Filipino World War II veterans of the Philippines

Commonwealth Army and former Philippines ‘‘New Scouts’’

who now legally and permanently reside in the United States.

4. Expand eligibility for outpatient dental care for all former

prisoners of war.

5. Strengthen auditing and reporting requirements for VA research and education corporations established at VA medical

centers.

6. Authorize the Department of Defense to participate in VA’s

Revolving Supply Fund for the purchase of health care items.

7. Name the VA outpatient clinic in New London, Connecticut,

for the late John J. McGuirk.

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BACKGROUND AND DISCUSSION

HEALTH CARE PROCUREMENT REFORM

The largest health care systems in the United States are managed by the Federal government, and the Department of Veterans

Affairs (VA) is a major component of the Federal health care system, with 6,470,224 veterans currently enrolled for fiscal year

2002. VA’s procurement programs spend approximately $5 billion

each year to obtain a wide array of goods and services needed by

VA to provide high-quality health care to veterans. Based on the

Committee’s analysis of reviews by the VA Inspector General (IG)

and the General Accounting Office (GAO), as well as other reports,

improved management of the purchasing of health care items in

Federal Supply Classification (FSC) categories 65 (medical and

dental supplies) and 66 (instruments and laboratory equipment),

could provide significant savings that may be used in furtherance

of VA’s essential mission.

In prior years, numerous indicators suggested that VA was not

achieving its potential as a large purchaser of medical and surgical

supply and equipment items to secure the best pricing. This general perspective was reinforced by a May 31, 2001, VA IG report

on the evaluation of purchasing practices in VA, as well as testimony provided by the GAO to the Subcommittee on Health at its

hearing on June 26, 2002.

The IG evaluation and GAO testimony identified numerous deficiencies in current purchasing practices. Among other findings, the

reports linked the cause of many deficiencies to a VA policy relieving agency procurement officials from the requirement to purchase

health care items from the Federal Supply Schedule (FSS). In effect, this policy decentralized VA’s contracting and procurement

processes for a very substantial part of procurements. Decentralization may have had the unintended effect of giving many vendors

of health care items an incentive to remove their products from the

FSS and to seek product sales in a generally more profitable VA

local-market arena.

In recent years, VA local-market purchases have proliferated,

often under contracts without the advantage of audit requirements

or ‘‘most-favored customer pricing’’ for the government, both practices normally required under FSS procedures. Seemingly cost-effective local purchases of health care items for a VA facility or a

small network of facilities have been touted as significant gains in

economies, but they obscure other, less efficient contracts and the

higher administrative costs of contracting locally. These practices

frustrate the aims of the FSS to obtain good products at the best

prices on a national basis for the Federal establishment at large.

Claims of continued cost-effective purchases have been made by

VA, but VA’s data reporting on local purchases is often contradictory and difficult to reconcile. Numerous exceptions for various

classes of health care items purchased under differing circumstances, coupled with a lack of standardized definitions for particular items have culminated in reports of widely variable local

purchases. Tracking local purchases is further complicated by a

growing VA practice of small-scale purchasing using governmentissued credit cards, in particular for purchases below the $25,000

reporting threshold for such purchase cards.

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In June 2001, the Secretary appointed a VA procurement task

force to evaluate the nature and scope of these problems and recommend solutions. The task force recommended leveraging the purchasing power of VA through mandated use of the FSS for medical

and surgical purchases.

The Committee bill would require the Secretary to take actions

consistent with the Department’s procurement task force report,

and would hold the Secretary accountable to Congress for tangible

results. The Committee bill advances two goals: to gain greater efficiency for the resources obligated by the Department for specific

classifications of health care items in FSC categories 65 (medical

and dental supplies) and 66 (instruments and laboratory equipment), and to instill more accountability.

All current indicators demonstrate the desirability of greater centralization of the Department’s acquisition process, but the Committee considers certain exceptions to this policy to be necessary

and beneficial. The Committee developed five exceptions to address

these needs. They are:

Near-term emergency needs.—Emergency purchases of health

care items would be permitted, not to exceed the quantities

reasonably necessary to meet the foreseeable need until resupply could be achieved through other actions. Authority for

emergency purchases would remain a local authority and

would be based on defined need. Bona fide emergency procurements would not require pre- or post-audit reviews or price reduction clauses otherwise required by the Committee’s bill for

all health care items.

Non-FSS-listed items to meet valid clinical needs.—A health

care item not listed on the Federal Supply Schedule or on a national contract could be purchased under the Committee bill if

a valid clinical need existed for the item and its procurement

were approved in advance. While procurement of such an item

would be conducted locally, its ultimate approval would rest

with Departmental senior executives specified in the Committee bill. The Committee concluded that a centralization of

the level of approval was necessary to assure the validity and

relative rarity of procurements of this type. The Committee bill

would require reports to the Committees on Veterans’ Affairs

of the House and Senate of the Department’s use of this exceptional authority.

Non-FSS-listed items for valid clinical needs specific to certain patients.—This exception to the general policy is similar

to the previous one, but it would target the health care item

needs of special patient populations such as veterans with spinal cord injury, severe visual impairments, amputations, and

other veterans whose disabilities are described in title 38,

United States Code, section 1706(b). Medical care items procured under this exception would be obtained to meet the special needs of one of these severely disabled veterans, determined by the Department to exhibit a valid clinical need for

the item or items in question. The Committee bill would require the Secretary of Veterans Affairs to promulgate procedures to govern such purchases.

11

Anticipated greater efficiencies from VA-DOD sharing initiatives.—Department of Veterans Affairs-Department of Defense

health resources sharing initiatives have long been recognized

as a method for improving efficiency and leveraging the potential of two very large health care delivery systems under separate governance. The Committee bill’s exception for VA-DOD

sharing ventures involving procurement of medical care items

would be intended to promote the sharing process and associated joint procurements when in the interest of the government. However, this exception would require demonstrable

savings (taking price and value into consideration) in comparison to similar items procured independently by either Department using FSS pricing or national contracts.

Protection for small business set-asides.—This exception

would afford protection to small business concerns qualifying

for procurement preference programs under the Small Business Act. Any contract under this exception would be required

to include pre- and post-award audit clauses. Also, any such

small business vendor that was a distributor (for other than

distribution services per se) would be required to clearly demonstrate the commercial value of an item the Department procured, in accordance with a given standard.

The Secretary would be required to issue and enforce procedures

that would limit the standardization of items for patient populations as identified in section 1706(b) title 38, United States Code.

A ‘‘one-size-fits-all’’ approach to the particular needs of severely

disabled veterans would be inappropriate. The Department’s clinical practitioners would not be constrained by limited choices for

severely disabled veterans. When selecting a health care item for

the specialized-care needs of veterans, the clinician would be authorized under the Committee bill to consider both clinical and

quality of life needs. Under the Committee bill, the Advisory Committee on Prosthetics and Special Disabilities Programs, established in section 543 of title 38, United States Code, would be authorized to oversee the Department’s implementation of the Committee’s bill as it would affect veterans under care in the various

programs defined in section 1706(b), title 38, United States Code.

The Advisory Committee would review the procedures promulgated

by the Secretary and advise the Secretary whenever those procedures were not effectively enforced by the Department.

In summary, the Committee bill would require the Secretary to

establish Department-wide goals for compliance with specified procurement requirements to maximize the percentage of purchases

that are made from Federal Supply Schedule and national contracts. The Secretary would be required to establish performance

goals for agency procurements from the FSS or national contracts,

and would be required to report actual performance toward

achievement of these goals to the Committees on Veterans’ Affairs

of the House and Senate at the conclusion of each fiscal year. The

Secretary would be required to analyze and report purchases not

made from the FSS or a national contract, and to evaluate Department employees responsible for procurement programs of their degree of compliance with the policies that would be promulgated by

enactment of the Committee bill.

12

ENHANCED-USE LEASE AUTHORITY

Chapter 81 of title 38, United States Code, authorizes the Department to conduct an enhanced-use lease program to assist the

Department in providing complementary uses of VA buildings and

land holdings that are not needed for the direct care of veterans.

The Department requested certain amendments be considered by

the Committee to provide more flexibility to the Department in expanding the enhanced-use lease program to more facilities and in

improving efficiency.

Under current law, business plans for enhanced-use lease

projects are proposed by the Department’s Under Secretary for

Health for properties under direct control of the Under Secretary.

The Committee bill would expand this authority to permit business

plans for enhanced-use leases to be proposed by the Under Secretary for Benefits and the Under Secretary for Memorial Affairs.

This provision would also clarify that the services which could be

provided as in-kind consideration for an enhanced-use lease would

not be limited to those provided on the leased property.

Two separate notifications to Congress are currently required by

law prior to the Department entering into an enhanced-use lease.

The Committee bill would combine the two notices into one notification. This report consolidation would streamline the Department’s notification process and increase the Department’s ability to

take advantage of opportunities in private-sector markets.

Also, any disposal of property subject to an enhanced-use lease

currently requires an additional procedural step, consultation with

the Administrator of General Services. The Committee bill would

remove this requirement and enable the Secretary to determine

that such dispositions are in the best interests of the Department.

Current law requires proceeds received by the Department from

an enhanced-use lease (and remaining after deduction of appropriate expenses) be deposited into the Health Services Improvement Fund, and any proceeds from a disposal of property subject

to an enhanced-use lease be deposited into the Nursing Home Revolving Fund. The Committee bill would allow each of the three

major administrations to be credited proceeds received from

projects under its jurisdiction (after reimbursement of expenses),

and would make these proceeds available for use by that administration. The provision would also clarify the Department’s ability

to use proceeds from an enhanced-use project to reimburse the account from which funds would be expended in the development of

that project.

HEALTH CARE FOR FILIPINO COMMONWEALTH ARMY AND NEW SCOUT

VETERANS

The Filipino soldiers of World War II served side-by-side with

forces from the United States, exhibiting great courage at the epic

battles of Bataan and Corregidor and contributing to the successful

outcome of the war. After the Philippines became independent,

Congress passed the Rescission Act of 1946, reducing or eliminating many of the veterans’ benefits Filipino veterans had been eligible for based on service in the Commonwealth Army. Today, almost 60 years later, 60,000 World War II Filipino veterans are

alive and continue to seek restoration of these benefits.

13

The Committee bill would provide a significant health care benefit to Commonwealth Army veterans and New Scouts of the Philippines who are permanent and legal residents of the United

States, giving them equal status with their American veteran

peers. Approximately 14,000 Filipino veterans in the United States

would be eligible for this health care benefit. The Department

would not offer these veterans access unless the Secretary of Veterans Affairs certified and provided public notice in the Federal

Register that it had the resources to do so. The Administration provided testimony in support of this provision and estimated that the

proposal would cost $52.6 million over 5 years.

DENTAL BENEFITS FOR ALL FORMER PRISONERS OF WAR

Chapter 17 of title 38, United States Code, authorizes dental care

and services for any dental condition to former prisoners of war

(POWs) who were interned or incarcerated for 90 days or more by

an enemy of the United States in wartime. The Committee bill

would authorize the Department to provide outpatient dental care

to former POWs, regardless of the length of their detention or internment. The Committee bill would ensure that former POWs receive all needed care for dental conditions that may be attributable

to the privations experienced during their service to the Nation

while held prisoner.

HEIGHTENED ACCOUNTABILITY FOR VA RESEARCH AND EDUCATION

CORPORATIONS

In 1988, Congress enacted Public Law 100–322, the Veterans’ Benefits and Services Act, which included a provision that gave the

VA the authority to establish nonprofit research corporations. The

Act provided a flexible funding mechanism for the conduct of approved research at medical centers. The impetus for establishing

the research corporations in law was to provide a conduit for research funds and an accounting mechanism whereby the VA would

submit to Congress an annual report on the number and location

of corporations established and the amount of contributions made

to each such corporation. Unfortunately, these reports provide Congress insufficient information about the activities of the corporations to enable Congress to provide proper oversight of their functions.

The Department’s Assistant Inspector General for Auditing has

testified before the Committee that the VA IG had published three

reports from 1994–97 on concerns about insufficient information relating to the functions of these corporations. These reports identified the need for stricter accountability and oversight with regard

to the administration of funds.

The Committee bill would amend section 7366 of title 38, United

States Code, to require each VA research corporation to submit to

the Secretary not later than March 1 of each year a detailed statement of corporate operations, activities and accomplishments during the preceding year. The statement would include the amount

of funds received along with the source of funding and an itemized

accounting for all disbursements. Under the Committee bill, those

corporations with funding in excess of $300,000 would continue to

be required to obtain an audit of the corporation for that year, and

corporations with funding totaling less than $300,000 would obtain

14

an audit every three years. These audits would continue to be conducted by independent auditors and performed in accordance with

generally accepted government auditing standards.

Under the Committee bill, the VA IG would be required to randomly review audits to determine whether they were carried out in

accordance with the auditing standards specified by the bill. The

Committee bill would also extend the authority for the corporations

until December 31, 2006.

AUTHORIZE THE DEPARTMENT OF DEFENSE TO PURCHASE MEDICAL

ITEMS AND SERVICES THROUGH VA’S REVOLVING SUPPLY FUND

The Veterans Millennium Health Care and Benefits Act, Public

Law 106–117, requires the Secretaries of DOD and VA to jointly

report on cooperation in procuring pharmaceuticals and medical

supplies and equipment. Joint VA-DOD procurement is one of the

President’s management objectives, and VA recently adopted the

recommendations of its procurement reform task force that endorsed joint procurement actions as a method to obtain better

prices. However, achievement of these goals is difficult because the

enabling language of the VA’s revolving supply fund does not permit direct support of DOD’s medical supply needs.

The Committee bill would grant direct authority to enable the

Secretary of Veterans Affairs to permit the Secretary of Defense to

use VA’s supply fund, and would require the Secretary of Defense

to reimburse the supply fund for such purchases.

NAMING OF VA COMMUNITY BASED OUTPATIENT CLINIC, NEW LONDON,

CONNECTICUT

The Committee bill would honor the late John J. McGuirk for his

service as a devoted World War II veteran and patriotic American

by affixing his name to the Department’s outpatient clinic in New

London, Connecticut.

During World War II, Mr. McGuirk, a New London native, joined

the Navy as a salvage diver and served honorably in the South Pacific. During his service, he was awarded the World War II Victory

Medal, Asiatic Pacific Theatre Medal, and the Philippine Liberation Medal.

Mr. McGuirk’s commitment to his Nation and fellow veterans

was prominent throughout his life. He was an advocate for the

opening of a VA clinic in southeastern Connecticut. His leadership

led the VA to establish a Veterans Outreach Clinic in New London,

on the grounds of the Coast Guard Academy.

The Connecticut Congressional delegation is unanimous in its

support for renaming this facility after Mr. McGuirk, as are the

Disabled Veterans of America, Veterans of Foreign Wars, Paralyzed Veterans of America, The American Legion, AMVETS, and

the Coast Guard Academy. The naming of this clinic in memory of

Mr. McGuirk is in compliance with the policy of the Committee for

naming Department of Veterans Affairs facilities.

SECTION-BY SECTION ANALYSIS

Section 1(a) of the bill would provide that this Act may be cited

as the ‘‘Veterans Health Care and Procurement Improvement Act

of 2002.’’

15

Section 1(b) of the bill sets forth the table of contents.

Section 2 of the bill explains that citations made throughout this

Act are understood to be amending, repealing or referencing sections of title 38 of the United States Code, unless otherwise stated.

Section 3(a) would limit use of local contracts for VA procurement of health care items by amending section 8125 of title 38,

United States Code.

Section 8125 would require purchase of health care items either

on a Federal Supply Schedule (FSS) contract or a national contract.

Section 8125(b)(1) would provide for five exceptions to the required use of FSS or national contracts.

Section 8125(b)(1)(A) would except a current or near-term medical emergency at a medical center.

Section 8125(b)(1)(B) would except a legitimate clinical need for

a health care item that is not available on a FSS contract or part

of a national contract.

Section 8125(b)(1)(C) would except the special needs of an individual patient if specified conditions are present and the patient’s

special needs are consistent with those special needs identified in

section 1706(b), title 38, United States Code.

Section 8125(b)(1)(D) would except items that are fundamental to

a sharing agreement between VA and the Department of Defense

(DOD), if a comparative cost savings is achieved.

Section 8125(b)(1)(E) would except purchases made through a

set-aside for small, disadvantaged, minority or veteran-owned businesses, with specific conditions.

Section 8125(b)(2) would establish an approval process for procuring items that are not part of a FSS or national contract and

would establish lines of authority within VA for obtaining advance

approval of such exemptions, which would be required to be in

writing.

Section 8125(c) would establish a standard of ‘‘reasonably foreseeable need’’ for the quantity of an item that could be purchased

using an emergency procurement exemption.

Section 8125(d) would establish the requirements for contracts

under this subsection and impose limitations on participation by

distributors who do not manufacture the product that would be

procured.

Sections 8125(d)(1)(A) and (B) would require such contracts to

contain ‘‘pre- and post-award audit clauses’’ and a ‘‘price reduction

clause’’.

Section 8125(d)(2) would require that any contract made with a

vendor that is a distributor would be for distribution services only

unless the manufacturer of the product can clearly demonstrate

that at least 60 percent of its sales of the item through that vendor

would be to commercial customers with negotiated product prices

and that the vendor actually stocks and distributes the product.

Section 8125(e)(1) would require the Secretary to establish procedures to assure compliance by each VA medical facility with the

provisions of this section and applicable Federal and VA procurement regulations.

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Section 8125(e)(2) would require that new compliance procedures

be designed to maximize both variety of items available and standard use of the FSS.

Section 8125(e)(3) would require the Secretary to establish and

enforce procedures limiting the standardization of items to be purchased at the local, regional or national level to provide patients

with special needs, as identified in section 1706(b), title 38, United

States Code, the range and type of health care items required to

meet their individual clinical and quality-of-life needs.

Section 8125(e)(4) would require the Advisory Committee on

Prosthetics and Special-Disabilities Programs to review VA’s procurement procedures and actual performance as they relate to special-need patient populations and to advise the Secretary when

those procedures are not effectively enforced by the VA.

Section 8125(f)(1) would require the Secretary to establish annual performance goals maximizing purchases of health care items

from FSS and national contracts.

Section 8125(f)(2) would require the Secretary to establish performance goals for procurements from small, disadvantaged, minority or veteran-owned businesses qualifying for a procurement preference program under the Small Business Act (15 U.S.C. 637, 644),

and would require that such goals be no less than the national goal

for each such procurement preference program.

Section 8125(f)(3) would require that achievement of the goals established under this subsection would be an element in performance standards for VA employees with the authority and responsibility for achieving those goals.

Section 8125(g) would provide that any portion of another provision of law dealing with the procurement of health care items that

is inconsistent with provisions of this Act would not apply to VA

procurement of a health care item.

Section 8125(h)(1) would require specific annual reports from the

VA detailing its procurement of health care items and implementation of provisions of this Act; the reports would be due to the Committees on Veterans’ Affairs of the Senate and House of Representatives by December 31 of each year and cover the preceding fiscal

year.

Sections 8125(h)(1)(A) through (D) would require such annual reports to include: the total dollar amount of all items listed in Federal Supply Classification Group 65 or 66 and the total dollar value

by medical facility of the exceptions to the required use of FSS or

national contracts; a detailed explanation for such exceptions, including the rationale for use of emergency procurement, approval

of requests for unlisted items and the exceptions for special health

care needs of veterans with disabilities; analysis of sharing agreements between VA and DOD; and the stated goal under each procurement preference program and an assessment of performance in

achieving that goal.

Section 8125(h)(2) would require the VA Advisory Committee on

Prosthetics and Special Disabilities to submit comments on each

such report under paragraph (1) and would require the Secretary

to include those comments in the report.

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Sections 8125(i)(1) through (5) would for purposes of this subsection would define the terms ‘‘health care item,’’ ‘‘national contract,’’ ‘‘valid clinical need,’’ ‘‘Federal Supply Schedule contract,’’

and ‘‘emergency procurement.’’

Section 3(b) of the bill would provide an effective date of September 30, 2003, for the amendment made by subsection (a); the

amendment would apply to VA procurements after that date.

Section 4(a) of the bill would expand the VA’s enhanced-use lease

authority by amending section 8162 of title 38, United States Code.

Section 4(a)(1) of the bill would amend section 8162(a)(2)(B) to

include under enhanced-use leasing authority each of the VA’s

Under Secretaries, rather than only the Under Secretary for

Health.

Section 4(a)(2) of the bill would amend section 8162(a)(2)(B) by

expanding enhanced-use leasing authority from provision of medical care and services to all programs and activities of the VA.

Section 4(b)(1)(A) and (B) of the bill would amend section 8163(a)

by changing the requirement for a public hearing from prior to

when the Secretary proposes to designate a property to be leased

to when the Secretary proposes to enter into an enhanced-use lease

for a property.

Section 4(b)(2) of the bill would amend section 8163(b) to specify

that notice must be given to the Committees on Veterans’ Affairs

of the House and Senate and to the public before the required public hearing on the proposed lease.

Sections 4(b)(3)(A) and (B) of the bill would amend section

8163(c)(1) and (2) by changing the requirement for notification to

the Committees on Veterans’ Affairs of the House and Senate from

the time of the Secretary’s intent to designate the property involved for an enhance-use lease, to the time of the Secretary’s intent to enter into an enhanced-use lease of the property involved,

and by reducing the period the Secretary must wait before entering

into such a lease from 90 days to 45 days.

Section 4(b)(3)(C) of the bill would amend section 8163(c)(3) by

requiring a description of the provisions of the proposed lease, rather than a general description of the proposed lease, and by requiring a summary of a cost-benefit analysis.

Section 4(b)(3)(D) of the bill would strike the requirement of section 8163(c)(4) that the Secretary report to the Committees on Veterans’ Affairs of the House and Senate not less than 30 days before

entering into an enhanced-use lease.

Section 4(c)(1) through (3) of the bill would amend section

8164(a) by eliminating the request of the Secretary to the Administrator of the General Services Administration regarding disposal of

the property, and the requirement of notice to the Committees on

Veterans’ Affairs of the House and Senate regarding disposition of

property would be reduced from 90 days to 45 days.

Section 4(d) of the bill would amend section 8165(a) and (b) to

allow funds received under an enhanced-use lease, after deduction

of expenses, to be credited to applicable appropriations of the administration; and to allow the Department to use proceeds from an

enhanced-use project to reimburse the appropriations of the DeVerDate 11-MAY-2000 04:02 Jul 24, 2002 Jkt 010199 PO 00000 Frm 00017 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR600.107 txed01 PsN: txed01
18

partment for expenses incurred in developing additional enhanceduse leases.

Section 4(e) of the bill would make clerical amendments to section 8163.

Section 5(a) of the bill would amend section 1734 of title 38,

United States Code, to authorize the Secretary to furnish hospital

and nursing home care and medical services to any individual who

is a Commonwealth Army veteran or Philippines New Scout who

is residing in the United States and who is a citizen of the United

States or who is an alien lawfully admitted to the United States

for permanent residence. Such care and services would be subject

to the same terms and conditions as they apply to individuals who

are veterans as defined in section 101(2) of title 38, United States

Code. Service-connected disabilities for purposes of this subchapter

(as provided for under section 1735(2) of title 38, United States

Code), would be considered to be a service-connected disability for

purposes of furnishing such care and services.

Section 5(b) of the bill would place a limitation on the provision

of such care and services by requiring the Secretary to submit to

the Committees on Veterans’ Affairs of the Senate and House of

Representatives and publish in the Federal Register a certification

that sufficient resources are available for the fiscal year during

which the certification is submitted and at those facilities where

the majority of these veterans would receive their care and services.

Section 6 of the bill would amend section 1712(a)(1)(F) of title 38,

United States Code, to authorize outpatient dental care for all

former prisoners of war without regard to the length of their internment or detention.

Section 7(a) of the bill would amend section 7366(b)(1) of title 38,

United States Code to require that each research corporation at a

VA medical center submit a report to the Secretary concerning the

preceding calendar by not later than March 1 of each year. The report would be required to include a detailed description of the corporation’s operations, activities, and accomplishments during the

preceding calendar year; a description of each funded research

project; a statement of the total funding controlled by the corporation; an itemized accounting of all disbursements made during the

year; the most recent audit of corporation; and such other information as necessary to assist Secretary with the report required under

section 7367 of title 38, United States Code.

Section 7366(b)(2) would require that corporations with funds in

excess of $300,000 during a calendar year obtain an audit for that

calendar year. Corporations with funding levels of less than

$300,000 would be required to obtain an independent audit at least

once every three years. The report would be required to include any

payment or travel provided to members of the board of directors of

the corporation and the amount of any such payment or travel.

Section 7366(b)(3) would require that any audit be performed in

accordance with generally accepted government auditing standards

and in accordance with Office of Management and Budget Circular

A–133.

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Section 7366(b)(4) would require that the Inspector General of

the Department review at least 10 percent of all corporations with

funds in excess of $300,000 each year and 10 percent of all corporations with funds below $300,000 at least once every three years. As

part of any such review, the VA’s Inspector General would be required to determine if the audits were carried out in accordance

with generally accepted government auditing standards.

Section 7(b) of the bill would amend Subchapter IV of chapter 73

of title 38, United States Code, by adding a new section 7367 with

the title, ‘‘Annual report to congressional committees’’.

Section 7367 would require that annual reports submitted by research corporations to the Secretary be submitted to Congress not

later than May 1 of the year following the year covered by such reports.

Section 7(c) of the bill would amend section 7368 of title 38,

United States Code, to extend authority to establish research corporations from December 31, 2003 until December 31, 2006.

Section 8(a) of the bill would amend section 8121 of title 38,

United States Code, by adding a new subsection to allow the Secretary to authorize the Department of Defense to make purchases

through the VA revolving supply fund in the same manner as activities of the VA, for services, equipment, or supplies furnished to

the Secretary of Defense through the fund. The reimbursement

would be made from Department of Defense appropriations and the

fund could be credited with advances from appropriations made

available to the Department of Defense.

Section 8(b) of the bill would provide that the amendment made

by section 8(a) would only apply to Department of Defense funds

appropriated for a fiscal year after fiscal year 2002.

Section 9 of the bill would name the Department of Veterans Affairs’ outpatient clinic in New London, Connecticut, the ‘‘John J.

McGuirk Department of Veterans Affairs Outpatient Clinic.’’

PERFORMANCE GOALS AND OBJECTIVES

The provisions of the reported bill that are covered by the Government Performance and Results Act would affect VA procurement and enhanced-use leasing activities, auditing and reporting

requirements for research and education corporations at VA facilities, and health and dental care eligibility for certain veterans. The

VA’s program performance goals and objectives are established in

annual performance plans and are subject to the Committee’s regular oversight.

STATEMENT OF THE VIEWS OF THE ADMINISTRATION

From the statement of Mr. Mark Catlett, Principal Deputy Assistant Secretary for Management, Department of Veterans Affairs,

before the Subcommittee on Health, Committee on Veterans’ Affairs, June 26, 2002:

We fully endorse the objective reflected in H.R. 3645 of

leveraging the purchasing power of VA and other Government agencies. . . . We recognize that H.R. 3645 supports

the objective of leveraging the purchasing power of VA and

20

other Government agencies. We believe that volume-leveraged purchasing in VA is essential. Our vast purchasing

power must not be fragmented and the Department must

employ contracting practices that achieve the best possible

terms and prices in our acquisitions of health care items.

. . . However, after careful consideration of the bill, VA

does not believe that legislation mandating any particular

procurement method in the acquisition of health care

items is desirable. As acquisition methods and trends continue to evolve, this legislation may not allow the Department the necessary flexibility to take advantage of those

improvements. The Department should not be compelled to

seek legislative changes in order to take advantage of improved procurement practices.

From the statement of the Honorable Anthony J. Principi, Secretary, Department of Veterans Affairs, before the Subcommittee

on Health, Committee on Veterans’ Affairs, June 13, 2002:

Specifically with regard to health care, prior to October

27, 2000, the law authorized VA to provide care in the Manila Outpatient Clinic only for the service-connected conditions of U.S. veterans. The term ‘U.S. veterans’ includes

members of the Old Philippine Scouts. With enactment of

Public Law 106–377 in October of 2000, Congress authorized VA to begin providing care in the clinic for the nonservice-connected conditions of those same U.S. veterans.

Filipino veterans, however, including Commonwealth

Army veterans and New Philippine Scouts, are not eligible

for VA health care in the Philippines. The Philippine Government provides health care to eligible Filipino veterans.

The law regarding care of Filipino veterans residing in the

United States also changed. Prior to the enactment of Public Law 106–377, VA was authorized to provide care in the

United States only for the service-connected conditions of

Commonwealth Army veterans, members of recognized

guerilla groups, and New Philippine Scouts. Public Law

106–377 authorized VA to begin providing hospital care,

nursing home care, and medical services to veterans of the

Commonwealth Army and recognized guerilla forces that

have service-connected disabilities on the same basis as

U.S. veterans. In short the change allowed these veterans

to seek care for their non-service-connected conditions. The

change in law did not expand eligibility for New Philippine

Scout veterans. They continue to be eligible for care in the

United States only on a discretionary basis (within the

limits of VA resources) and only for service-connected disabilities. Mr. Chairman, legislation currently pending before the House and the Senate would further expand benefit eligibility for Filipino veterans and their survivors. In

that regard, I am pleased to inform the Committee that,

in our April 25 letter, addressed to Chairman Rockefeller

of the Senate Committee on Veterans’ Affairs, on S. 1042,

the Department expressed the Administration’s support for

the following enhancements in benefits to Filipino veterans

and their survivors:

21

. . .

• providing comprehensive care on the same basis as

for U.S. veterans for veterans of the Commonwealth

Army, recognized guerilla forces and New Philippine Scouts who are residing in the United States

and are either citizens of, or aliens lawfully admitted for permanent residence in the United States,

regardless of whether they have service-connected

disabilities.

. . . Mr. Chairman, VA continues to work with the White

House to explore opportunities to enhance our assistance

to Filipino veterans. Section 1731 of Title 38 authorizes

the President to assist the Republic of the Philippines in

fulfilling its responsibilities in providing medical care and

treatment for Commonwealth Army veterans and new

Philippine Scouts. I am working to utilize this authority to

provide grants of equipment, as well as assistance in installation and maintenance of the equipment, to the Philippine government to improve care at the Veterans Memorial Medical Center in Manila. I anticipate the equipment

grants would be for $500,000 per year.

ROLL CALL VOTES

During Committee consideration of H.R. 3645, there was a recorded vote on an amendment offered by Mr. Filner to extend compensation benefits to certain Filipino veterans. The amendment

was rejected on a roll vote of 14–15.

Date: Tuesday, July 16, 2002

Call to Order: 9:35 a.m.

Adjourn: 11:10 a.m.

Subject: Filner amendment to H.R. 3645 (as amended)

22

NAME YEA NAY NOT VOTING

Chris Smith, NJ, Chairman ......................... x

Bob Stump, AZ ............................................ x

Michael Bilirakis, FL, Vice Chairman ......... x

Terry Everett, AL .......................................... x

Steve Buyer, IN ........................................... x

Jack Quinn, NY ............................................ x

Cliff Stearns, FL .......................................... x

Jerry Moran, KS ........................................... x

Howard (Buck) McKeon, CA ........................ x

Jim Gibbons, NV .......................................... x

Mike Simpson, ID ........................................ x

Richard Baker, LA ....................................... x

Rob Simmons, CT ....................................... x

Ander Crenshaw, FL .................................... x

Henry Brown, SC ......................................... x

Jeff Miller, FL .............................................. x

John Boozman, AR ...................................... x

Lane Evans, IL, Ranking ............................. x

Bob Filner, CA ............................................. x

Luis Gutierrez, IL ......................................... x

Corrine Brown, FL ....................................... x

Julia Carson, IN .......................................... x

Silvestre Reyes, TX ...................................... x

Vic Snyder, AR ............................................ x

Ciro Rodriguez, TX ...................................... x

Ronnie Shows, MS ...................................... x

Stephen Lynch, MA ..................................... x

Shelley Berkley, NV ..................................... x

Baron P. Hill, IN .......................................... x

Tom Udall, NM ............................................ x

Susan Davis, CA ......................................... x

TOTAL .................................... 14 15 2

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

The following letter was received from the Congressional Budget

Office concerning the cost of the reported bill:

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, July 19, 2002.

Hon. CHRISTOPHER H. SMITH

Chairman, Committee on Veterans’ Affairs,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3645, the Veterans

Health Care and Procurement Reform and Improvement Act of

2002.

23

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Sam Papenfuss, who can

be reached at 226–2840.

Sincerely,

DAN L. CRIPPEN, Director.

Enclosure.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

H.R. 3645, VETERANS HEALTH CARE AND PROCUREMENT IMPROVEMENT

ACT OF 2002, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON

VETERANS’ AFFAIRS ON JULY 16, 2002

SUMMARY

H.R. 3645 would change how the Department of Veterans Affairs

(VA) procures its health care items. The bill would require that all

health care items be purchased through the use of the federal supply schedule (FSS) or national contracts, except for defined exceptions and emergencies approved by the Secretary of Veterans Affairs. H.R. 3645 also would expand VA’s enhanced-use lease authority. In addition, the bill would expand health care benefits for

certain Filipino veterans, and provide dental benefits for certain

former prisoners of war. H.R. 3645 would institute new auditing

and accountability standards for research corporations established

at VA medical centers. Finally, H.R. 3645 would name an outpatient clinic in New London, Connecticut, as the ‘‘John J.

McGuirk Department of Veterans Affairs Outpatient Clinic.’’

The expanded authority for entering into enhanced-use leases

would likely generate new federal collections (shown in this estimate as an offset to direct spending), but spending of such additional collections would be subject to appropriation action. CBO estimates that enacting the bill would not affect direct spending in

2003, but would reduce direct spending by about $2 million over

the 2003–2007 period, and by about $4 million over the 2003–2012

period. Because the bill would affect direct spending, pay-as-you-go

procedures would apply.

In addition, H.R. 3645 would modify provisions governing discretionary spending for veterans’ health care programs, which CBO

estimates would result in outlays of $8 million in 2003 and $65

million over the 2003–2007 period, assuming appropriation of the

estimated amounts.

H.R. 3645 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA)

and would not affect the budgets of state, local, or tribal governments.

ESTIMATED COST TO THE FEDERAL GOVERNMENT

The estimated budgetary impact of H.R. 3645 is shown in the following table. The costs of this legislation fall within budget function 700 (veterans benefits and services).

24

By Fiscal Year, in Millions of Dollars

2002 2003 2004 2005 2006 2007

CHANGES IN DIRECT SPENDING

Estimated Budget Authority ...... 0 0 a ¥1 ¥1 ¥1

Estimated Outlays ................ 0 0 a ¥1 ¥1 ¥1

SPENDING SUBJECT TO APPROPRIATION

Baseline Spending Under Current Law for Veterans’ Medical

Care

Estimated Authorization

Level b ................................ 22,178 22,884 23,684 24,700 25,262 26,094

Estimated Outlays ................ 22,202 22,865 23,485 24,189 24,978 25,801

Proposed Changes

Estimated Authorization

Level .................................. 0 9 16 15 14 13

Estimated Outlays ................ 0 8 15 15 14 13

Spending Under H.R. 3645 for

Veterans’ Medical Care

Authorization Level b ............ 22,178 22,893 23,700 24,715 25,276 26,107

Estimated Outlays ................ 22,202 22,873 23,500 24,204 24,992 25,814

aLess than $500,000.

bThe 2002 level is the estimated net amount appropriated for that year. The current law amounts for the 2003–2007 period are CBO baseline projections that assume appropriations remain at the 2002 level, with adjustments for inflation.

BASIS OF ESTIMATE

For this estimate CBO assumes that the bill will be enacted near

the beginning of fiscal year 2003, and that estimated amounts will

be appropriated each year.

DIRECT SPENDING

H.R. 3645 would expand VA’s current authority to enter into enhanced-use leases and to dispose of certain property. An enhanceduse lease is one where VA leases out its property on the condition

that at least part of the property is used in a manner that contributes to VA’s mission or improves services provided to veterans in

the region where the lease occurs. Under current law, only the Veterans Health Administration (VHA) within VA has the authority to

enter into enhanced-use leases. The lease payments to VHA are deposited into the Health Services Improvement Fund.

Under current law, amounts deposited into the Health Services

Improvement Fund are considered offsets to direct spending, but

VA may spend amounts in the fund without appropriation action.

Thus, any such collections are spent, resulting in no net impact on

direct spending. In addition, VA has the authority to sell property

it leases to other parties at any time during the lease period and

up to 30 days after the lease has expired. Proceeds from those sales

are deposited into the Nursing Home Revolving Fund. Amounts deposited into the Nursing Home Revolving Fund are considered offsets to direct spending and spending from the fund is subject to appropriation action.

Veterans Health Administration Leases of Property. CBO expects

that VHA would find it easier to enter into enhanced-use leases

under H.R. 3645 because the bill would shorten the time period between when VHA notifies the Congress and the public of its intent

to lease out a property and when that lease can be signed from 90

25

days to 45 days. CBO estimates that under this provision VHA

would increase its receipts by less than $500,000 a year because

the shorter notification period would not be a significant change

from current practice. (The VHA currently receives about $1 million in annual receipts from enhanced-use leases.) Because VHA

can spend these collections without appropriation action, CBO estimates that the net impact of this provision on the budget would be

negligible for each year.

Veterans Health Administration Sales of Property. CBO also expects that VHA would be able to sell its leased property more easily under the bill since it also would shorten the time period between when VHA notifies the Congress and the public of its intent

to sell a property and when the sale can be completed from 90 days

to 45 days. Under current law, the VHA must notify the General

Services Administration (GSA) about proposed sales and the two

agencies must jointly agree on the terms of the sale. Under the bill,

VHA would be able to sell its leased property on its own without

having to notify or work with GSA. However, proceeds from the

sale of leased property would no longer be deposited into the Nursing Home Revolving Fund under the bill, but would be deposited

to the General Fund of the Treasury. While future sales could

produce offsetting receipts, CBO believes that VHA would not dispose of any property under this bill because it would not be able

to spend the proceeds.

Veterans Benefit Administration and National Cemetery Administration Leases of Property. H.R. 3645 also would allow both the Veterans Benefit Administration and the National Cemetery Administration to enter into enhanced-use leases. Proceeds from these

leases would be credited to each organization’s appropriation account, but spending from the fund would be subject to annual appropriation action.

Because the increased collections would stem from the authority

granted in H.R. 3645 (and would not be subject to appropriation action), we show them as a reduction in direct spending in this cost

estimate. Based on the current level of collections received by the

VHA, CBO estimates that enacting this provision would have no

budgetary impact in 2003, but would increase collections by less

than $500,000 in 2004 and by just over $500,000 every year thereafter. Thus, CBO estimates the bill would reduce direct spending

by about $2 million over the 2003–2007 period, and by about $4

million over the 2003–2012 period.

Veterans Benefit Administration and National Cemetery Administration Sales of Property. As with VHA, the Veterans Benefit Administration and the National Cemetery Administration would also

be allowed to dispose of leased or recently leased property with the

proceeds reverting to the General Fund of the Treasury. As discussed above, CBO does not expect that either of these two organizations would actually dispose of any property because the proceeds

would be deposited into the U.S. Treasury.

SPENDING SUBJECT TO APPROPRIATION

Three provisions in H.R. 3645 could affect spending subject to appropriation. The bulk of CBO’s estimated impact on discretionary

26

spending, however, is for a provision that would make certain Filipino veterans newly eligible for VA health care benefits.

Filipino Veterans. Under current law, only certain Filipino veterans who served during World War II are eligible for health care

benefits from VA. Under H.R. 3645, any individual who is a Commonwealth Army veteran or New Philippine Scout living legally in

the United States would be eligible for VA health care benefits.

Using information from VA, CBO estimates that in 2003 about

11,000 Filipino veterans would qualify for this new benefit. CBO

estimates that about 2,000 of these veterans would use VA health

care benefits in 2003 at an estimated cost of $4,200 per person.

After adjusting for mortality, CBO expects that the number of eligible Filipino veterans using VA health care benefits would grow to

2,700 by 2007 as more of these veterans become aware of the benefit. Accordingly, CBO estimates that providing health care benefits to these Filipino veterans would cost $8 million in 2003 and

$65 million over the 2003–2007 period, assuming appropriation of

the necessary amounts. Costs could be significantly higher—if a

much greater percentage of the eligible Filipino veterans apply for

the health benefits.

Health Care Procurement. H.R. 3645 would change how the VA

procures its health care items. The bill would require that all

health care items be purchased through the use of the FSS or national contracts, except for narrowly defined exceptions and emergencies approved by the Secretary of Veterans Affairs. CBO believes that implementing the bill might generate some small savings, assuming appropriations are reduced accordingly, but we cannot provide a specific estimate.

VA currently spends about $4.5 billion annually from appropriated funds buying health care items, and many of those items

are already purchased through the use of FSS or national contracts. That is especially true for pharmaceuticals, which account

for more than $2.5 billion of VA’s health care purchases. Restructuring VA’s procedures for buying health care products under H.R.

3645 might generate some small savings, but we cannot estimate

the amount. Available data from VA is primarily anecdotal, and

while some VA facilities purchase items locally and pay more than

they might under a national contract, other VA facilities purchase

health care items at prices lower than FSS or national contract

rates. Based on this information and a recent study by the General

Accounting Office of purchasing groups for hospitals, CBO does not

believe that using FSS or national contracts uniformly would lower

costs for all VA facilities. Thus, any savings would be offset to some

extent by increased costs at some hospitals. Without more specific

data, CBO cannot estimate the extent of the net savings that might

occur from implementing H.R. 3645.

Dental Care for Prisoners of War. Under current law, former prisoners of war are eligible for dental benefits provided by VA if they

were prisoners of war for more than 90 days. Under H.R. 3645, all

former prisoners of war would be eligible for dental benefits regardless of how long they were held as prisoners. Using information

from VA, CBO estimates that this provision would cost less than

$500,000 a year.

27

PAY-AS-YOU-GO CONSIDERATIONS

The Balanced Budget and Emergency Deficit Control Act sets up

pay-as-you-go procedures for legislation affecting direct spending or

receipts. The net changes in outlays that are subject to pay-as-yougo procedures are shown in the following table. For the purposes

of enforcing pay-as-you-go procedures, only the effects through fiscal year 2006 are counted.

By Fiscal Year, in Millions of Dollars

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Changes in outlays 0 0 a ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1

Changes in receipts Not Applicable

aLess than $500,000.

INTERGOVERNMENTAL AND PRIVATE–SECTOR IMPACT

H.R. 3645 contains no intergovernmental or private-sector mandates as defined in UMRA and would not affect the budgets of

state, local, or tribal governments.

PREVIOUS CBO ESTIMATE

On June 26, 2002, CBO transmitted a cost estimate for H.R.

3645, the Veterans Health Care Items Procurement Reform and

Improvement Act of 2002, as introduced on January 29, 2002. Both

versions of the bill would change the way VA procures its health

care items, though H.R. 3645, as ordered reported, would establish

somewhat less stringent restrictions on VA’s procurement practices

than the introduced bill. CBO believes that changing VA’s procurement practices as specified in either version of the bill might

produce some small savings in discretionary spending, but we cannot estimate the amount of those savings.

In addition, H.R. 3645, as ordered reported, contains several provisions that are not in the introduced bill, including the provision

of health care to certain Filipino veterans, expansion of VA’s enhanced-use lease authority, and the provision of dental care to certain veterans. Differences in the other estimated costs reflect these

differences in the bills.

ESTIMATE PREPARED BY:

Federal Costs: Sam Papenfuss

Impact on State, Local, and Tribal Governments: Greg Waring

Impact on the Private Sector: Sally S. Maxwell

ESTIMATE APPROVED BY:

Peter H. Fontaine

Deputy Assistant Director for Budget Analysis

STATEMENT OF FEDERAL MANDATES

The preceding Congressional Budget Office cost estimate states

that the bill contains no intergovernmental or private sector mandates as defined in the Unfunded Mandates Reform Act.

28

APPLICABILITY TO LEGISLATIVE BRANCH

The reported bill would not be applicable to the legislative

branch under the Congressional Accountability Act, Public Law

104–1, because the bill would only affect certain Department of

Veterans Affairs health care programs.

STATEMENT OF CONSTITUTIONAL AUTHORITY

Pursuant to Article I, section 8 of the United States Constitution,

the reported bill is authorized by Congress’ power to ‘‘provide for

the common Defense and general Welfare of the United States.’’

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics,

existing law in which no change is proposed is shown in roman):

TITLE 38, UNITED STATES CODE

* * * * * * *

PART II—GENERAL BENEFITS

* * * * * * *

CHAPTER 17—HOSPITAL, NURSING HOME,

DOMICILIARY, AND MEDICAL CARE

* * * * * * *

SUBCHAPTER II—HOSPITAL, NURSING HOME OR

DOMICILIARY CARE AND MEDICAL TREATMENT

* * * * * * *

§ 1712. Dental care; drugs and medicines for certain

disabled veterans; vaccines

(a)(1) Outpatient dental services and treatment, and related dental appliances, shall be furnished under this section only for a dental condition or disability—

(A) * * *

* * * * * * *

(F) from which a veteran who is a former prisoner of war

øand who was detained or interned for a period of not less

than 90 days¿ is suffering;

* * * * * * *

SUBCHAPTER IV—HOSPITAL CARE AND MEDICAL TREATMENT FOR VETERANS IN THE REPUBLIC OF THE PHILIPPINES

* * * * * * *

29

§ 1734. Hospital and nursing home care and medical services in the United States

ø(a) The Secretary, within the limits of Department facilities,

may furnish hospital and nursing home care and medical services

to Commonwealth Army veterans and new Philippine Scouts for

the treatment of the service-connected disabilities of such veterans

and scouts.

ø(b) An individual who is in receipt of benefits under subchapter

II or IV of chapter 11 of this title paid by reason of service described in section 107(a) of this title who is residing in the United

States and who is a citizen of, or an alien lawfully admitted for

permanent residence in, the United States shall be eligible for hospital and nursing home care and medical services in the same manner as a veteran, and the disease or disability for which such benefits are paid shall be considered to be a service-connected disability

for purposes of this chapter.¿

(a) The Secretary shall furnish hospital and nursing home care

and medical services to any individual described in subsection (b)

in the same manner, and subject to the same terms and conditions,

as apply to the furnishing of such care and services to individuals

who are veterans as defined in section 101(2) of this title. Any disability of an individual described in subsection (b) that is a serviceconnected disability for purposes of this subchapter (as provided for

under section 1735(2) of this title) shall be considered to be a service-connected disability for purposes of furnishing care and services

under the preceding sentence.

(b) Subsection (a) applies to any individual who is a Commonwealth Army veteran or new Philippine Scout and who—

(1) is residing in the United States; and

(2) is a citizen of the United States or an alien lawfully admitted to the United States for permanent residence.

* * * * * * *

PART V—BOARDS, ADMINISTRATIONS, AND

SERVICES

* * * * * * *

CHAPTER 73—VETERANS HEALTH ADMINISTRATION— ORGANIZATION AND FUNCTIONS

* * * * * * *

SUBCHAPTER IV—RESEARCH CORPORATIONS

7361. Authority to establish; status.

* * * * * * *

7367. Annual report to congressional committees.

* * * * * * *

SUBCHAPTER IV—RESEARCH CORPORATIONS

* * * * * * *

§ 7366. Accountability and oversight

(a) * * *

30

ø(b) Each such corporation shall submit to the Secretary an annual report providing a detailed statement of its operations, activities, and accomplishments during that year. A corporation with

revenues in excess of $300,000 for any year shall obtain an audit

of the corporation for that year. A corporation with annual revenues between $10,000 and $300,000 shall obtain an independent

audit of the corporation at least once every three years. Any audit

under the preceding sentences shall be performed by an independent auditor. The corporation shall include the most recent

such audit in the corporation’s report to the Secretary for that

year.¿

(b)(1) Not later than March 1 each year, each such corporation

shall submit to the Secretary a report concerning the preceding calendar year. Each such annual report shall include the following:

(A) A detailed statement of the corporation’s operations, activities, and accomplishments during the preceding calendar

year.

(B) A description of each research project or activity for which

funds were provided by the corporation during that year or for

which funds were provided by the corporation during a preceding year and that is ongoing during the year covered by the

report, including, for each such project or activity, the title of

the project or activity and a description of the purpose of the

project or activity.

(C) A statement of the amount of funds controlled by the corporation as of the first day, and as of the last day, of the year

covered by the report and a statement of the amount of funds

received, shown by source, during the year.

(D) An itemized accounting of all disbursements made during

the year.

(E) The most recent audit of the corporation under paragraph

(2).

(F) Such other information as may be necessary to enable the

Secretary to prepare the annual report to congressional committees required under section 7367 of this title.

(2) A corporation with a balance of funds under its control in excess of $300,000 at any time during a calendar year shall obtain an

audit of the corporation for that year. Any other corporation shall

obtain an independent audit of the corporation at least once every

three years. The report on any such audit shall specifically state

whether the corporation audited made any payment, or provided

any travel, during the period covered by the audit to a member of

the board of directors of the corporation and, if so, the amount and

recipient of any such payment or travel.

(3) Any audit under paragraph (2) shall be performed by an independent auditor and shall be performed in accordance with generally accepted Government auditing standards and in accordance

with Office of Management and Budget Circular A–133.

(4) The Inspector General of the Department shall each year review the most recent audit under paragraph (2) of not less than 10

percent of the corporations described in the first sentence of paragraph (2) and not less than 10 percent of the corporations described

in the second sentence of that paragraph. As part of such review,

the Inspector General shall determine whether the audit was carried

31

out in accordance with generally accepted Government auditing

standards, as required by paragraph (3).

* * * * * * *

§ 7367. Annual report to congressional committees

ø(d)¿ (a) The Secretary shall submit to the Committees on Veterans’ Affairs of the Senate and House of Representatives an annual report on the corporations established under this subchapter.

Each such report shall be based on the annual reports submitted by

the corporations to the Secretary under section 7366(b) of this title

and shall be submitted not later than May 1 of the year following

the year covered by such reports. øThe report shall¿

(b) Each such report shall set forth the following information:

(1) * * *

* * * * * * *

§ 7368. Expiration of authority

No corporation may be established under this subchapter after

December 31, ø2003¿ 2006.

* * * * * * *

PART VI—ACQUISITION AND DISPOSITION OF

PROPERTY

* * * * * * *

CHAPTER 81—ACQUISITION AND OPERATION OF HOSPITAL AND DOMICILIARY FACILITIES; PROCUREMENT

AND SUPPLY; ENHANCED–USE LEASES OF REAL PROPERTY

* * * * * * *

SUBCHAPTER V—ENHANCED–USE LEASES OF REAL PROPERTY

8161. Definitions.

8162. Enhanced-use leases.

ø8163. Designation of property to be leased.¿

8163. Hearing and notice requirements regarding proposed leases.

* * * * * * *

SUBCHAPTER II—PROCUREMENT AND SUPPLY

§ 8121. Revolving supply fund

(a) * * *

(b) The Secretary may authorize the Secretary of Defense to make

purchases through the fund in the same manner as activities of the

Department. When services, equipment, or supplies are furnished to

the Secretary of Defense through the fund, the reimbursement required by paragraph (2) of subsection (a) shall be made from appropriations made to the Department of Defense, and when services or

supplies are to be furnished to the Department of Defense, the fund

may be credited, as provided in paragraph (3) of subsection (a),

with advances from appropriations available to the Department of

Defense.

32

(c) At the end of each fiscal year, there shall be covered into the

Treasury of the United States as miscellaneous receipts such

amounts as the Secretary determines to be in excess of the requirements necessary for the maintenance of adequate inventory levels

and for the effective financial management of the revolving supply

fund.

ø(b)¿ (d) An adequate system of accounts for the fund shall be

maintained on the accrual method, and financial reports prepared

on the basis of such accounts. An annual business type budget

shall be prepared for operations under the fund.

ø(c)¿ (e) The Secretary is authorized to capitalize, at fair and reasonable values as determined by the Secretary, all supplies and

materials and depot stocks of equipment on hand or on order.

* * * * * * *

ø§ 8125. Procurement of health-care items

ø(a) Except as provided in subsections (b) and (c) of this section,

the Secretary may not procure health-care items under local contracts.

ø(b)(1) A health-care item for use by the Department may be procured under a local contract if— ø(A) the procurement is within the limits prescribed in paragraph (3) of this subsection; and

ø(B)(i) the item is not otherwise available to the Department

medical center concerned,

ø(ii) procurement of the item by a local contract is necessary

for the effective furnishing of health-care services or the conduct of a research or education program at a Department medical center, as determined by the director of the center in accordance with regulations which the Under Secretary for

Health shall prescribe, or

ø(iii) procurement under a local contract is demonstrably

more cost-effective for the item.

ø(2) In the case of the need for an emergency procurement of a

health-care item, such item may be procured under a local contract,

but no greater quantity of such item may be procured by a local

contract than is reasonably necessary to meet the emergency need

and the reasonably foreseeable need for the item at the medical

center concerned until resupply can be achieved through procurement actions other than emergency procurement.

ø(3)(A) Except as provided in subparagraphs (C) and (D) of this

paragraph, not more than 20 percent of the total of all health-care

items procured by the Department in any fiscal year (measured as

a percent of the total cost of all such health-care items procured by

the Department in that fiscal year) may be procured under local

contracts.

ø(B) Local contracts for the procurement of health-care items

shall, to the maximum extent feasible, be awarded to regular dealers or manufacturers engaged in the wholesale supply of such

items.

ø(C) The Secretary may increase for a fiscal year the percentage

specified in subparagraph (A) of this section to a percentage not

greater than 30 percent if the Secretary, based on the experience

of the Department during the two fiscal years preceding such fiscal

year, determines that the increase and the amount of the increase

33

are necessary in the interest of the effective furnishing of healthcare services by the Department. The authority to increase such

percentage may not be delegated.

ø(D) Items procured through an emergency procurement shall

not be counted for the purpose of this paragraph.

ø(c) A provision of law that is inconsistent with subsection (a) or

(b) of this section shall not apply, to the extent of the inconsistency,

to the procurement of a health-care item for use by the Department.

ø(d)(1) Not later than December 1 of each year, the director of

each Department medical center shall transmit to the Secretary a

report containing a list indicating the quantity of each health-care

item procured at that medical center under a local contract during

the preceding fiscal year and the total amount paid for such item

during such fiscal year.

ø(2) No later than February 1 of each year, the Secretary shall

submit to the Committees on Veterans’ Affairs of the Senate and

the House of Representatives a report on the experience in carrying

out this section during the preceding fiscal year.

ø(e) For the purposes of this section:

ø(1) The term ‘‘health-care item’’ includes any item listed in,

or (as determined by the Secretary) of the same nature as an

item listed in, Federal Supply Classification (FSC) Group 65 or

66. Effective December 1, 1992, such term also includes any

item listed in, or (as determined by the Secretary) of the same

nature as an item listed in, Federal Supply Classification

(FSC) Group 73. Such term does not include perishable items.

ø(2) The term ‘‘local contract’’ means a contract entered into

by a Department medical center for procurement of an item for

use by that medical center.

ø(3) The term ‘‘emergency procurement’’ means a procurement necessary to meet an emergency need, affecting the

health or safety of a person being furnished health-care services by the Department, for an item.¿

§ 8125. Procurement of health-care items

(a) Except as provided in subsection (b), any procurement of a

health-care item by the Department shall be made through the use

of a Federal Supply Schedule contract, or a national contract, that

meets the requirements of subsection (d).

(b)(1) Subsection (a) does not apply to a procurement of a healthcare item in any of the following cases:

(A) A procurement that is necessary to meet a current or nearterm medical emergency at a medical center.

(B) A procurement that is for a health-care item that is not

listed in the Federal Supply Schedule or as part of a national

contract and for which there is a valid clinical need.

(C) A procurement that is for a specialized health-care item

not listed in the Federal Supply Schedule or as part of a national contract and that is to meet the special needs of an individual patient who has one of the special needs identified in

section 1706(b) of this title and who has a valid clinical need

for the item.

(D) A procurement that is part of an approved sharing agreement between the Department of Defense and the Department of

34

Veterans Affairs with demonstrable cost-per-item savings for a

health-care item listed on the Federal Supply Schedule or a national contract.

(E) A procurement that supports a prime contract or a subcontract with a small business concern qualifying for a procurement preference program under section 8 or 15 of the Small

Business Act (15 U.S.C. 637, 644), if the cost of the item to be

procured is no more than the cost (taking price and value into

consideration) of the comparable item on the Federal Supply

Schedule or national contract and if the item meets the requirements of subsections (d)(1)(A) and (d)(2).

(2) A procurement may be made as authorized under subparagraph (B) of paragraph (1) only if the procurement is specifically

authorized in advance in writing by the Secretary. The authority of

the Secretary under the preceding sentence may only be delegated to

the Deputy Secretary or to an official of the Veterans Health Administration not below the level of a Deputy Under Secretary (or equivalent) acting jointly with a procurement executive of the Department

not below the level of an Associate Deputy Assistant Secretary.

(c) In the case of an emergency procurement of a health-care item

as authorized by subsection (b)(1)(A), the quantity of the item procured may not exceed the quantity of that item that is the reasonably foreseeable need for the item at the medical center concerned

until resupply can be achieved through procurement actions other

than emergency procurement.

(d) A contract meets the requirements of this subsection if—

(1) the contract includes—

(A) provisions referred to as ‘‘preaward and postaward

audit clauses’’; and

(B) a provision referred to as a ‘‘price reduction clause’’;

and

(2) in the case of a contract to be made with a vendor that

is a distributor, the contract will be for distribution services

only unless the manufacturer of the product can clearly demonstrate that at least 60 percent of its sales of the item through

that vendor is to commercial customers with negotiated product

prices and that the vendor actually stocks and distributes the

product.

(e)(1) The Secretary shall establish procedures to assure compliance by each Department medical facility with the provisions of this

section and with applicable Federal and Department procurement

regulations.

(2) The procedures established by the Secretary under paragraph

(1) shall be designed to maximize health-care item variety and the

use of the Federal Supply Schedule.

(3) The Secretary shall establish and enforce procedures limiting

the standardization of items at the local, regional, or national level

to provide special patient populations (as identified in section

1706(b) of this title) with the range and types of health-care items

required to meet their clinical and quality-of-life needs.

(4) The Advisory Committee on Prosthetics and Special-Disabilities Programs established under section 543 of this title shall review the procedures established under paragraph (3), including the

implementation of those procedures, and shall advise the Secretary

35

when those procedures are not effectively enforced by the Department.

(f)(1) The Secretary shall establish annual goals for Department

medical centers for the purchase of health-care items from Federal

Supply Schedule and national contracts meeting the requirements of

subsection (d). Such goals shall be designed to maximize the percentage of such purchases that are made through such contracts.

(2) The Secretary shall establish goals for the Department for procurements from small business concerns qualifying for a procurement preference program under section 8 or 15 of the Small Business Act (15 U.S.C. 637, 644). Such goals shall be no less than the

national goal for each such procurement preference program under

either of those sections.

(3) Achievement of the goals established under this subsection

shall be an element in the performance standards for employees of

the Department who have the authority and responsibility for

achieving those goals.

(g) A provision of law that is inconsistent with any provision of

this section shall not apply, to the extent of the inconsistency, to the

procurement of a health-care item for the Department.

(h)(1) Not later than December 31 each year, the Secretary shall

submit to the Committees on Veterans’ Affairs of the Senate and

House of Representatives a report on the procurement of health-care

items during the preceding fiscal year. Each such report shall include, for the year covered by the report, the following:

(A) The total dollar amount of all items listed in Federal

Supply Classification (FSC) Group 65 or 66 and the total dollar

value of the exceptions to subsection (a) under each of subparagraphs (A), (B), (C), (D), and (E) of subsection (b)(1), shown by

medical facility.

(B) A detailed explanation for exceptions to subsection (a),

including— (i) the rationale for use of emergency procurement at Department medical facilities;

(ii) the rationale for approval of requests under subsection (b)(1)(B) for procurement of items not listed on the

Federal Supply Schedule or on national contracts; and

(iii) exceptions granted for special health-care needs of

veterans with disabilities described in section 1706(b) of

this title.

(C) Analysis of sharing agreements between the Department

and the Department of Defense to indicate the basic written

sharing initiative and the division of financial responsibility between the two Departments.

(D) The stated goal under each procurement preference program, together with an assessment of the performance of the Department toward achievement of that goal, especially with respect to the goal for contracting with businesses that are owned

by veterans with service-connected disabilities.

(2) The Advisory Committee on Prosthetics and Special- Disabilities Programs of the Department shall submit comments on each

report under paragraph (1) before the report is submitted under that

paragraph, and the Secretary shall include those comments in the

report as submitted.

(i) For the purposes of this subsection:

36

(1) The term ‘‘health-care item’’ includes any item listed in,

or (as determined by the Secretary) of the same nature as an

item listed in, Federal Supply Classification (FSC) Group 65 or

66.

(2) The term ‘‘national contract’’ means a contract for procurement of an item that is entered into by the National Acquisition Center of the Department or another Department procurement activity, as authorized by the Secretary, that is available

for use by all Department medical facilities.

(3) The term ‘‘valid clinical need’’ means in the professional

judgment of an appropriate clinician. Such term applies to

health care items, prosthetic appliances, sensory or mobility

aids and supplies that are prescribed by a physician for special

patient populations such as veterans with spinal cord dysfunction, blindness, amputations, and other veterans included in

section 1706(b) of this title.

(4) The term ‘‘Federal Supply Schedule contract’’ means a

contract that is awarded and administered by the National Acquisition Center of the Department under a delegation of authority from the Administrator of the General Services Administration.’’ (5) The term ‘‘emergency procurement’’ means a procurement

necessary to meet an emergency need affecting the health or

safety of a person being furnished health-care services by the

Department.

* * * * * * *

SUBCHAPTER V—ENHANCED–USE LEASES OF REAL

PROPERTY

* * * * * * *

§ 8162. Enhanced-use leases

(a)(1)***

(2) The Secretary may enter into an enhanced-use lease only if—

(A) * * *

(B) the Secretary determines that the implementation of a

business plan øproposed by the Under Secretary for Health¿

proposed by one of the Under Secretaries for applying the consideration under such a lease øto the provision of medical care

and services¿ to the programs and activities of the Department

would result in a demonstrable improvement of services to eligible veterans in the geographic service-delivery area within

which the property is located.

* * * * * * *

ø§ 8163. Designation of property to be leased¿

§ 8163. Hearing and notice requirements regarding proposed

leases

(a) If the Secretary proposes to ødesignate a property to be

leased under an enhanced-use lease¿ enter into an enhanced-use

lease with respect to certain property, the Secretary shall conduct

a public hearing øbefore making the designation¿ before entering

into the lease. The hearing shall be conducted in the community in

37

which the property is located. At the hearing, the Secretary shall

receive the views of veterans service organizations and other interested parties regarding the proposed lease of the property and the

possible effects of the uses to be made of the property under a lease

of the general character then contemplated. The possible effects to

be addressed at the hearing shall include effects on— (1) * * *

* * * * * * *

(b) Before conducting such a hearing, the Secretary shall provide

reasonable notice øof the proposed designation¿ to the congressional veterans’ affairs committees and to the public of the proposed

lease and of the hearing. The notice shall include the following:

(1) * * *

* * * * * * *

(c)(1) If after a hearing under subsection (a) the Secretary intends to ødesignate the property involved¿ enter into an enhanceduse lease of the property involved, the Secretary shall notify the

congressional veterans’ affairs committees of the Secretary’s intention øto so designate the property¿ to enter into such lease and

shall publish a notice of such intention in the Federal Register.

(2) The Secretary may not enter into an enhanced use lease until

the end of the ø90–day period¿ 45–day period beginning on the

date of the submission of notice under paragraph (1).

(3) Each notice under paragraph (1) shall include the following:

(A) * * *

* * * * * * *

(D) A øgeneral¿ description of the provisions of the proposed

lease.

* * * * * * *

(G) A summary of a cost-benefit analysis of the proposed

lease.

ø(4) Not less than 30 days before entering into an enhanced-use

lease, the Secretary shall submit to the congressional veterans’ affairs committees a report on the proposed lease. The report shall

include—

ø(A) updated information with respect to the matters described in paragraph (3);

ø(B) a summary of a cost-benefit analysis of the proposed

lease;

ø(C) a description of the provisions of the proposed lease; and

ø(D) a notice of designation with respect to the property.¿

§ 8164. Authority for disposition of leased property

(a) If, during the term of an enhanced-use lease or within 30

days after the end of the term of the lease, the Secretary determines that the leased property is no longer needed by the Department, the Secretary may initiate action for the transfer to the lessee of all right, title, and interest of the United States in the property øby requesting the Administrator of General Services to dispose of the property pursuant to subsection (b)¿. A disposition of

property may not be made under this section unless the Secretary

determines that the disposition under this section rather than

under section 8122 of this title is in the best interests of the DeVerDate 11-MAY-2000 04:02 Jul 24, 2002 Jkt 010199 PO 00000 Frm 00037 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR600.107 txed01 PsN: txed01
38

partment. øThe Administrator, upon request of the Secretary, shall

take appropriate action under this section to dispose of property of

the Department that is or has been subject to an enhanced-use

lease.¿

(b) A disposition under this section may be made for such consideration as the øSecretary and the Administrator of General Services jointly determine¿ Secretary determines is in the best interest

of the United States and upon such other terms and conditions as

the øSecretary and the Administrator consider¿ Secretary considers

appropriate.

(c) Not less than ø90 days¿ 45 days before a disposition of property is made under this section, the Secretary shall notify the congressional veterans’ affairs committees of the Secretary’s intent to

dispose of the property and shall publish notice of the proposed disposition in the Federal Register. The notice shall describe the background of, rationale for, and economic factors in support of, the proposed disposition (including a cost-benefit analysis summary) and

the method, terms, and conditions of the proposed disposition.

§ 8165. Use of proceeds

(a)ø(1)¿ Funds received by the Department under an enhanced-use lease and remaining after any deduction from those

funds under subsection (b) shall be deposited in the Department of

Veterans Affairs Health Services Improvement Fund established

under section 1729B of this title, except that any funds received by

the Department under an enhanced-use lease in support of the Veterans Benefits Administration or the National Cemetery Administration and remaining after any deduction from such funds under

subsection (b) shall be credited to applicable appropriations of that

Administration.

ø(2) Funds received by the Department from a disposal of leased

property under section 8164 of this title and remaining after any

deduction from such funds under the laws referred to in subsection

(c) shall be deposited in the nursing home revolving fund.¿

(b) An amount sufficient to pay for any expenses incurred by the

Secretary in any fiscal year in connection with an enhanced-use

lease shall be deducted from the proceeds of the lease for that fiscal

year and may be used by the Secretary to reimburse the account

from which the funds were used to pay such expenses. The Secretary may use the proceeds from any enhanced-use lease to reimburse applicable appropriations of the Department for any expenses

incurred in the development of additional enhanced-use leases.

ø(c) Subsection (a) does not affect the applicability of section 204

of the Federal Property and Administrative Services Act of 1949

(40 U.S.C. 485) or the Act of June 8, 1896 (40 U.S.C. 485a), with

respect to reimbursement of the Administrator of General Services

for expenses arising from any disposal of property under section

8164 of this title.¿

* * * * * * *

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