Supply Chain Management and COVID-19 Response (GAO-20-638T)
Summary
GAO testimony, GAO-20-638T, before the Senate Committee on Veterans' Affairs on June 9, 2020, the statement of Shelby S. Oakley, Director, Contracting and National Security Acquisitions, on supply chain management at the Department of Veterans Affairs (VA) and the COVID-19 response. It notes that VA spends hundreds of millions of dollars annually to meet the health care needs of about 9 million veterans. It states that GAO added VA Acquisition Management to its High Risk list in March 2019. GAO finds that VA has taken some steps to modernize how it acquires medical supplies, but implementation delays for key initiatives, including a new enterprise-wide inventory management system, limit its ability to have an agile, responsive supply chain.
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United States Government Accountability Office
Testimony
Before the Committee on Veterans’
Affairs, U.S. Senate
VA ACQUISITION
For Release on Delivery
Expected at 3:00 p.m. EST
Tuesday, June 9, 2020
MANAGEMENT
Supply Chain
Management and COVID-
19 Response
Statement of Shelby S. Oakley, Director
Contracting and National Security Acquisitions
GAO-20-638T
June 9, 2020
VA ACQUISITION MANAGEMENT
Supply Chain Management and COVID-19 Response
Highlights of GAO-20-638T, a testimony
before the Committee on Veterans’ Affairs,
U.S. Senate
Why GAO Did This Study What GAO Found
VA spends hundreds of millions of The Department of Veterans Affairs (VA) has taken some steps in recent years to
dollars annually to meet the health modernize its processes to acquire hundreds of millions of dollars-worth of
care needs of about 9 million veterans. medical supplies annually. However, implementation delays for key initiatives,
In March 2019, GAO added VA including a new, enterprise-wide inventory management system, limit VA’s ability
Acquisition Management to its High to have an agile, responsive supply chain. Prior to the Coronavirus Disease 2019
Risk list due to longstanding problems (COVID-19) pandemic, in November 2017 and in GAO’s High-Risk report in
such as ineffective purchasing of March 2019, GAO reported on weaknesses in VA’s acquisition management. For
medical supplies and lack of reliable example, GAO reported that VA’s implementation of its Medical-Surgical Prime
data systems.
Vendor-Next Generation (MSPV-NG) program—VA’s primary means for
This statement summarizes findings purchasing medical supplies—lacked an effective medical supply procurement
from GAO’s 2017 MSPV-NG report strategy, clinician involvement, and reliable data systems. GAO also found that
and 2019 High Risk report and several of VA’s medical supply management practices were not in line with those
preliminary observations from two employed by private sector leading hospital networks.
ongoing GAO performance audits to
discuss VA’s progress in building a VA is developing another iteration of its MSPV program, called MSPV 2.0, which
more resilient supply chain. For the GAO’s preliminary observations show is intended to address some of the
ongoing work, GAO reviewed VA shortfalls GAO has identified in its past and ongoing program reviews. In
documentation and interviewed VA November 2017, GAO recommended that VA develop, document and
officials, and VA medical center staff. communicate an overarching MSPV-NG strategy—to include how the program
Finally, GAO met with senior VA office will prioritize categories of supplies and increase clinician involvement in
officials on June 5, 2020, to obtain this process. Preliminary observations from GAO’s ongoing work indicate that VA
agency views on the new observations has taken some steps, as it implements MSPV 2.0, to address this priority
GAO discusses in this statement. recommendation. However, GAO’s preliminary observations also indicate that
the MSPV 2.0 program implementation is delayed and some of these existing
What GAO Recommends program challenges may not be remedied.
GAO has made 40 recommendations
Based on preliminary observations from GAO’s ongoing work, VA’s
since 2015 to improve acquisition
management at the VA. VA agreed
implementation of a new supply and inventory management system is delayed.
with those recommendations and has As a result, VA had to rely on an antiquated inventory management system, and
implemented 22 of them. Further initial, manual spreadsheets to oversee the stock of critical medical supplies at its
actions are needed to implement the medical centers. This limited the ability of VA management to have real-time
remaining recommendations, such as information on its pandemic response supplies, ranging from N95 face masks to
GAO’s recommendation that VA isolation gowns, to make key decisions. As of April 2020, VA has an automated
implement an overarching MSPV tool to manage its reporting process, but the information must be gathered and
strategy, and demonstrate progress manually reported by each of VA’s 170 medical centers on a daily basis.
toward removing this area from GAO’s
GAO’s preliminary observations also show that in response to COVID-19, VA is
High-Risk list.
using various contracting organizations and mechanisms to meet its critical
medical supply needs. These include using national and regional contracting
offices to obtain supplies from existing contract vehicles, new contracts and
agreements, and the Federal Emergency Management Administration’s Strategic
National Stockpile to respond to the pandemic.
View GAO-20-638T. For more information,
contact Shelby S. Oakley at (202) 512-4841 or
oakleys@gao.gov
United States Government Accountability Office
Letter
Chairman Moran, Ranking Member Tester, and Members of the
Committee:
Thank you for having me here today to discuss our past work and
observations on the Department of Veterans Affairs (VA) medical supply
chain. VA spends hundreds of millions of dollars annually on medical
supplies to meet the health care needs of about 9 million veterans and
has one of the most significant acquisition management functions in the
federal government.
Since 2015, we have issued five reports on VA’s acquisition management
challenges, with 40 recommendations, and we elevated this issue to
GAO’s High-Risk List in 2019, due to longstanding problems such as
ineffective purchasing of medical supplies and lack of reliable data
systems. 1 VA has addressed 22 of our prior recommendations. For
example, in November 2017, GAO recommended that VA develop,
document, and communicate an overarching Medical-Surgical Prime
Vendor-Next Generation (MSPV-NG) strategy—to include how the
program office will prioritize categories of supplies and increase clinician
involvement in this effort. Our preliminary observations from our ongoing
work indicate that although VA has taken some steps to address this
priority recommendation, it has yet to fully implement it. Further, VA has
also begun efforts to modernize its supply chain, but our ongoing work
indicates that several key initiatives are delayed, further limiting VA’s
ability to have an agile, responsive acquisition management system.
Like most medical institutions nationwide, VA has faced difficulties
obtaining personal protective equipment (PPE) for its medical workforce
during the Coronavirus Disease 2019 (COVID-19) pandemic, and VA’s
antiquated inventory management system hampered its ability to identify
the extent to which each of its 170 medical centers faced these
shortages. VA officials reported that they had difficulty obtaining sufficient
supplies from their existing supply chain and associated contracting
vehicles; thus, VA used new contracts and agreements to fill some of this
void.
1 GAO, High-Risk Series: Substantial Efforts Needed to Achieve Greater Progress on
High-Risk Areas, GAO-19-157SP (Washington, D.C.: Mar. 6, 2019).
Page 1 GAO-20-638T
My remarks today are based on two issued reports—our 2019 High Risk
report segment on VA Acquisition Management and our 2017 report on
VA’s MSPV-NG program—as well as our ongoing audits of VA’s COVID-
19-related medical expenditures and VA’s MSPV program. 2 Today, I will
summarize a few key findings from these reports and some of our initial
observations from this ongoing work related to VA’s progress toward
building a more resilient supply chain.
As part of our work for our November 2017 and March 2019 reports and
our ongoing MSPV 2.0 work, we reviewed VA policies, communications,
briefings, prior GAO reports on best practices for organizational
transformation, relevant legislation, and other documents. 3 We conducted
interviews with VA officials responsible for Veterans Health Administration
(VHA) and VA-wide procurement and logistics, program office managers,
and supply chain managers, among other VA officials. We also conducted
site visits to 12 medical centers, selected based on highest total spending
on medical and surgical supplies, among other things. As part of our work
on VA’s response to the COVID-19 medical procurements, we reviewed
VA memoranda, briefings, Federal Procurement Data System-Next
Generation (FPDS-NG) procurement data, and we met with key VA
personnel responsible for the agency’s response to COVID-19. Finally,
we met with senior VA officials on June 5, 2020, to obtain agency views
on the new observations we discuss in this statement.
We conducted the work on which this statement is based in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on
our audit objectives.
2 GAO, Veterans Affairs Contracting: Improvements in Buying Medical and Surgical
Supplies Could Yield Cost Savings and Efficiency, GAO-18-34 (Washington, D.C.: Nov. 9,
2017).
3 See GAO-18-34 and GAO-19-157SP; more detailed information on the scope and
methodology is contained within these reports.
Page 2 GAO-20-638T
The issues VA experienced during the height of the COVID-19 pandemic
Longstanding were a result of global supply chain challenges, but longstanding
Problems in VA problems that our work has previously identified posed additional
challenges to VA’s response.
Acquisition
Management and In November 2017, we reported weaknesses in VA’s implementation of its
MSPV-NG program—VA’s primary means for purchasing medical
Medical Supply supplies. These included the lack of an effective medical supply
Management Posed procurement strategy, clinician involvement, and reliable data systems.
We also found that several of VA’s medical supply management practices
Additional Challenges were not in line with those employed by private sector leading hospital
in VA’s COVID-19 networks. We recommended, among other things, that VA develop,
document, and communicate to stakeholders an overarching strategy for
Response the program. 4 This strategy, originally planned for completion by
December 2017, was delayed to March 2019, and then further delayed
due to VA’s implementation of its new MSPV 2.0 program, which is also
delayed. We also found that VA’s initial formulary consisted of around
6,000 items at launch, and, according to senior VA contracting officials,
many items on the formulary were not those needed by medical centers.
These factors resulted in an initial formulary that did not meet the needs
of VA’s medical centers (VAMC).
The MSPV-NG program office subsequently took steps to expand the
formulary, growing it to over 22,000 items, and is developing the next
iteration of the program, called MSPV 2.0. MSPV 2.0 is intended to
address some of the shortfalls we previously identified in MSPV-NG,
including more than doubling the number of items on the formulary, to a
planned 49,000. VA’s MSPV 2.0 prime vendor procurement has been
subject to multiple bid protests. After three protests challenged the terms
of the solicitation, VA responded by voluntarily taking corrective action
and revising the solicitation. The terms of the revised solicitation were
challenged in a subsequent protest that was sustained, resulting in VA
further revising the solicitation to address the matter. Because of these
events, agency officials told us that VA has altered its MSPV 2.0
procurement plans several times and there has been significant delay in
program implementation from the originally planned March 2020 date to
as late as February 2021.
Based on preliminary observations of our ongoing work, some of the
current MSPV-NG challenges persist and may not be remedied by MSPV
4 See GAO-18-34.
Page 3 GAO-20-638T
2.0. Specifically, medical center staff we interviewed from May 2019
through October 2019 cited continued problems with consistently
receiving the supplies they order through MSPV-NG, such as backorders
on frequently ordered items. For example, preceding the COVID-19
pandemic, supply chain problems with one of VA’s prime vendors created
supply shortages for infection control gowns, and staff at one VAMC we
visited in June 2019 had to obtain gowns from its emergency cache as a
temporary measure. Further, VA’s plans for MSPV 2.0 give no indication
that they will update their practice of manually maintaining the formulary
using spreadsheets, which, based on our discussions with several VAMC
logistics officers, can lead to errors such as inadvertent omission of items
from the formulary. We plan to issue a report on our review of the MSPV
2.0 program in fall 2020.
According to senior VA procurement and logistics officials interviewed
VA’s Antiquated during our ongoing review of VA’s COVID-19 procurement for critical
Inventory medical supplies, VA experienced difficulty obtaining several types of
supplies needed to protect its front-line workforce during the COVID-19
Management System response, ranging from N95 masks to isolation gowns. According to
Limited VA senior VA acquisition and logistics officials, beginning in late February to
early March 2020, VA requested that medical centers provide daily
Management’s Ability updates via spreadsheets to try to obtain the most real time information
to Oversee Real-Time possible on the levels of PPE on hand, usage, and gaps. These
spreadsheets, which were reported manually on a daily basis from each
Supply Data at Its of the VAMCs, were the primary means by which Veterans Health
170 Medical Centers Administration (VHA) leadership obtained detailed information on the
stock of critical supplies at its VAMCs in real-time. The insight provided by
these spreadsheets was not something that VHA leadership had in any
type of ongoing or systematic way, prior to the COVID-19 pandemic. In
April 2020, VA developed an automated tool to manage this reporting
process, but, according to officials, the information must still be gathered
and manually reported by each of the 170 VAMCs on a daily basis. 5
In May 2019, the VA Inspector General found that proper inventory
monitoring and management was lacking at many VAMCs, noting that
5 VHA issued an April 17, 2020 memorandum to VAMCs “to reduce the variation in
methods used to report and calculate PPE levels on hand within the VHA.” According to
VA’s Acting Assistant Under Secretary for Health for Support Services, VA developed a
Power Business Intelligence Tool in April 2020, in response to the pandemic, which allows
VA senior procurement, health, and logistics officials to view PPE supply status at a
national and VAMC level.
Page 4 GAO-20-638T
inventory management practices ranged from inaccurate to nonexistent. 6
In 2013, we also reported on weaknesses in VA’s inventory management
systems and made recommendations to VA to evaluate its efforts to
improve in this area. 7
However, our preliminary observations from our ongoing review of VA’s
MSPV program indicate that VA will likely rely on its antiquated system for
the foreseeable future. Specifically, VA plans to transition to the Defense
Logistics Agency’s (DLA) inventory management system, called Defense
Medical Logistics Standard Support (DMLSS). DMLSS serves as DLA’s
primary MSPV ordering system and supports DLA’s inventory
management, among other things. According to DLA officials, DMLSS
produces data that VAMCs could use to analyze their order history and
find recommendations for future purchases. VA’s implementation
schedule shows that it will take seven years to roll out DMLSS and its
successor at all VAMCs. In the near-term, VA had planned to implement
DMLSS at three medical centers in mid-to-late 2019. However, due to
technology integration issues between VA’s financial system and the
DMLSS system, implementation at these three VAMCs is delayed.
According to the Chief Supply Chain Officer at one of these VAMCs, the
original DMLSS implementation date has changed several times from an
initial start date of August 2019, which may be delayed to at least October
2020.
VA uses a “just in time” inventory supply model—a practice employed by
many hospital networks where only limited stock is maintained on-site.
However, for this model to succeed, VA needs both visibility into current
stock and consistent deliveries from the MSPV-NG program. Based on
our preliminary observations, VA faces challenges with both visibility and
delivery. VA acquisition leadership has recognized the shortcomings in its
medical supply chain management, and has identified supply chain
modernization as a priority. As part of our ongoing review of VA’s MSPV
program, we reviewed VHA’s Modernization Campaign Plan, dated March
2019, and VHA’s Modernization Plan briefing slides, dated February
2020, which describe several modernization initiatives including MSPV
6 Department of Veterans Affairs, Office of Inspector General, Veterans Health
Administration: Expendable Inventory Management System: Oversight of Migration from
Catamaran to the Generic Inventory Package (May 1, 2019).
7 GAO, Veterans Health Care: VHA Has Taken Steps to Address Deficiencies in Its
Logistics Program, but Significant Concerns Remain, GAO-13-336 (Washington, D.C: Apr.
17, 2013).
Page 5 GAO-20-638T
2.0 and DMLSS. 8 VHA’s February 2020 update on its modernization effort
identified both its DMLSS deployment and MSPV 2.0 program at critical
risk of not meeting system modernization milestones.
Based on our preliminary observations from our ongoing review of VA’s
VA’s COVID-19 procurement of critical medical supplies, in response to COVID-19, VA is
Emergency using various existing and new contracting organizations and
mechanisms to try to meet its PPE needs. These include using national
Procurement Included and regional contracting offices to procure supplies and services, and
Various VA using existing contract vehicles and new sources. In response to the
pandemic, VA’s Office of Acquisition and Logistics also issued a
Contracting memorandum on March 15, 2020, to implement emergency flexibilities
Organizations and available under the Federal Acquisition Regulation, such as increasing
the micro-purchase threshold to $20,000. 9
Mechanisms
Our analysis of contracting activity in the Federal Procurement Data
System-Next Generation (FPDS-NG) indicates that VHA’s Network
Contracting Offices—which support the various regions of VA’s hospital
network—increased their supply purchases, mostly by entering into new
contracts. 10 Department-wide contracting organizations that would
normally not make individual supply purchases—such as VHA’s Program
Contracting Activity Central and VA’s Strategic Acquisition Center—also
played a substantial role. 11 In addition, logistics staff at VAMCs continued
to use the MSPV-NG program to order supplies. VA had existing clauses
in MSPV-NG contracts that established terms for the suppliers to maintain
8VHA Modernization Campaign Plan, dated March 2019, and VHA Plan for Modernization,
Monthly Co-Leads Meeting (Feb. 28, 2020).
9 A micro-purchase is an acquisition of supplies or services using simplified acquisition
procedures, the aggregate amount of which does not exceed the micro-purchase
threshold. VA’s March 15 memorandum delegated authority to specified VA contracting
officials to invoke emergency acquisition flexibilities available under Federal Acquisition
Regulation part 18. See VA Executive Director, Office of Acquisition and Logistics and
Senior Procurement Executive mem. re: Emergency Acquisition Flexibilities—Emergency
Assistance Activities in Support of Global Pandemic for Coronavirus Disease 2019
(COVID-19) (Mar. 15, 2020).
10 FPDS-NG is the central repository for U.S. government procurement data. For contract
actions over the micro-purchase threshold, agencies must submit detailed contract
information to FPDS-NG. The database includes the product or service, agency and
vendor information, contract start and estimated completion dates, and location of
performance, among other elements.
11 We have previously found FPDS-NG data sufficiently reliable for summarizing total
obligations. FPDS-NG has added a new COVID-19 2020 value for the National Interest
Action data element to track the relief contracts.
Page 6 GAO-20-638T
support to VA in the event of a catastrophe. But, according to senior VA
acquisition officials, because those suppliers faced the same shortages in
the broader market, they were not able to provide enough supplies to
meet VA’s surging demand.
Figure 1 shows the COVID-19-related contract obligations, from March
13, 2020 through June 3, 2020, made by the various VA contracting
offices. These obligations include both supplies, such as PPE, and
services, such as information technology systems to support
telemedicine.
Figure 1: Total COVID-19-Related Obligations for Selected Department of Veterans
Affairs Contracting Offices from March 13, 2020 through June 3, 2020
Our analysis of preliminary data on orders placed directly by VAMC staff
for COVID-19-related items found that, in April 2020, the value of VA’s
reported COVID-19-related purchases through the MSPV-NG program
began to decrease relative to the values reported in prior months.
According to senior VA acquisition and logistics officials, in part, because
MSPV-NG and other existing VA supply contracts and agreements did
not meet VA’s needs, its acquisition workforce had to make purchases
through other contracting mechanisms, such as micro-purchases using
government purchase cards, to fill the gap. Between March 13, 2020 and
June 3, 2020 VA obligated more than 51 percent ($687 million) of the
$1.3 billion it spent on products and services for the COVID-19 response
through purchases made outside the MSPV-NG program and other
established VA contracting mechanisms. About 27 percent of this $1.3
Page 7 GAO-20-638T
billion ($364 million) was for veteran-owned small business set-aside
purchases, under VA’s Veterans First program. 12
On April 17, 2020, VA placed its first supply requests through the Federal
VA Collaborated with Emergency Management Administration’s (FEMA) Strategic National
the Federal Stockpile program, according to VA senior acquisition and logistics
officials. 13 As of June 5, 2020, according to information provided by the
Emergency VA, it had received shipments of several different types of supplies
Management Agency through FEMA from these requests, as shown in Table 1.
(FEMA) in Response
to COVID-19
Table 1: COVID-19-Related Items Requested by the Department of Veterans Affairs
and Received from the Federal Emergency Management Administration, as of
June 5, 2020
Received as of
Item Total Requested June 5, 2020
N95 Masks 5,000,000 7,042,320
Eye Protection (Face Shield or 660,000 427,000
Goggles/Glasses)
Generic Masks 7,500,000 0
Gloves (in pairs) 7,200,000 4,992,000
Gowns (Isolation gowns – Level 3,400,000 0
2)
Powered Air Purifying Respirator 11,500 3,258
Source: Department of Veterans Affairs.| GAO-20-638T
According to VA senior procurement and logistics officials, VA’s
Emergency Management Center has an existing relationship with FEMA.
However, these senior procurement and logistics officials noted that VA
support services officials—who had primary responsibility for requesting
12 In 2006, in order to increase opportunities for veterans to do business with VA,
Congress directed the department to apply a preference for contracting with Veteran-
Owned Small Businesses (VOSB) and Service-Disabled Veteran-Owned Small
Businesses (SDVOSB). VA created what it calls its Veterans First Contracting Program to
implement the statute. The Veterans Benefits, Health Care, and Information Technology
Act of 2006, Pub. L. No. 109-461, § 502(a), 120 Stat. 3403, 3431 (2016) (codified as
amended at 38 U.S.C. § 8127).
13 The Strategic National Stockpile’s role is to supplement state and local supplies during
public health emergencies. The supplies, medicines, and devices for life-saving care
contained in the stockpile can be used as a short-term stopgap buffer when the immediate
supply of adequate amounts of these materials may not be immediately available.
Page 8 GAO-20-638T
medical items through FEMA—did not have an existing relationship with
FEMA or a process in place prior to the COVID-19 pandemic for placing
medical supply requests through FEMA. Officials said that this led to a
brief, initial delay in processing VA’s first request.
In summary, VA experienced many of the same challenges obtaining
medical supplies as most private sector hospitals and other entities in
responding to this devastating pandemic. This situation put stress on an
already overburdened acquisition and logistics workforce—resulting in
staff initially scrambling to address supply chain shortfalls while
simultaneously working with VA’s antiquated inventory system, through
manual, daily reports on PPE levels to VA leadership. While VA has
made progress in addressing some of the issues that have led us to
identify VA acquisition management as high risk, it will take many years
for VA to put in place a modern supply chain management system that
would position it to provide the most efficient and effective service to our
nations veterans.
Chairman Moran, Ranking Member Tester, and Members of the
Committee, this concludes my prepared statement. I would be pleased to
respond to any questions that you may have at this time.
If you or your staff have any questions about this testimony, please
GAO Contacts and contact Shelby S. Oakley at 202-512-4841 or OakleyS@gao.gov. Contact
Staff points for our Offices of Congressional Relations and Public Affairs may
be found on the last page of this statement. GAO staff who made key
Acknowledgments contributions to this testimony are Lisa Gardner, Assistant Director;
Teague Lyons, Assistant Director; Daniel Singleton, Analyst-in-Charge;
Jeff Hartnett, Nicolaus Heun, Kelsey M. Carpenter, Sara Younes,
Matthew T. Crosby; Suellen Foth, Lorraine Ettaro, Rose Brister, Susan
Ditto, Roxanna Sun, Carrie Rogers, and Helena Johnson.
(104372)
Page 9 GAO-20-638T
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