Review of VHA Sole-Source Contracts with Affiliated Institutions

In August 2006, the Secretary, Department of Veterans Affairs (VA), signed into policy VA Directive 1663, Healthcare Resources Contracting - Buying, Title 38 U.S.C. 8153. Under 38 U.S.C. 8153 VA may enter into non-competitive (sole-source) contracts with affiliated institutions for healthcare resources. VA Directive 1663 requires a pre-award review for healthcare resources procured on a sole source basis that are valued at more than $500,000. The purpose of this report is to advise VA of our collective findings in our pre-award reviews since VA Directive 1663 became effective. We determined that the Veterans Health Administration (VHA) has not effectively implemented all the requirements set forth in VA Directive 1663 due to lack of resources, training, and enforcement which resulted in consistent contracting and pricing issues with sole-source contracts with affiliated institutions. Our report also discusses our findings regarding conflict of interest issues and recommends that VA seek personal services contracting authority. The Under Secretary for Health concurred with all of our findings and recommendations and provided an acceptable action plan.