Review of a Covered Drug Manufacturer’s Interim Agreement under Letter Contract with VA’s National Acquisition Center

The Office of Inspector General conducted a review of an Interim Agreement (IA) under a Letter Contract with the VA National Acquisition Center (NAC). Under Federal Acquisition Regulation (FAR) Section 16.603, a Letter Contract serves to provide more time for the negotiation and award of a formal contract and should be in place no longer than 180 days. The NAC has awarded IAs and letter contracts with pharmaceutical manufacturers for purposes of compliance with Section 603 of the Veterans Health Care Act of 1992, Public Law 102-585 (P.L.). The review determined that the IA had been in place nearly seven years and lacked a schedule for definitizing a formal contract, in violation of FAR requirements. The review also determined that Federal Ceiling Prices mandated by the P.L. cannot be calculated correctly under an IA. The NAC has awarded 165 IAs in the last 10 years, and 153 of them exceeded the prescribed timeframes for definitizing a formal contract. The Office of Acquisition, Logistics, and Construction concurred with our findings and our recommended corrective actions.