Inadequate Oversight of the Medical/Surgical Prime Vendor Program’s Order Fulfillment and Performance Reporting for Eastern Area Medical Centers

The VA Office of Inspector General (OIG) conducted this audit to determine if VA effectively monitored Medical/Surgical Prime Vendor-Next Generation Program (MSPV-NG) order fulfillment and vendor performance. This audit focused on VA medical centers serviced by American Medical Depot (AMD). MSPV-NG is VA’s national program for obtaining medical or surgical supplies across the Veterans Health Administration (VHA). The audit team reviewed a sample of AMD’s delivery orders and estimated that medical centers received incorrect orders about 60 percent of the time. Incorrect orders occurred when delivery orders and invoice pricing did not match approved costs, products were obtained from unapproved suppliers, or staff obligated funds without proper authority. When necessary supplies are unavailable or incorrect because of vendors’ errors, veterans’ quality of care could be at risk. Orders were incorrect because VHA’s Healthcare Commodities Program Office and VA’s Strategic Acquisition Center did not develop a formal process to validate prime vendor performance reporting and the algorithm used by AMD. In addition, contracting officer representative (COR) positions at four of eight VA medical centers were vacant. CORs are responsible for monitoring vendor accuracy and performance. As a result, VA did not verify AMD’s self reported compliance with performance measures. The audit team found that AMD did not use the calculations and methodologies required by its contract, which led to inaccurate reporting. AMD also used unapproved suppliers. In addition, deliveries and invoice pricing did not match approved product costs, causing improper payments. The audit team estimated that, without correction, VA would improperly pay AMD about $84 million over the next five years. The OIG made 11 recommendations to VA including establishing measures to ensure vendor compliance with contract requirements and developing and implementing processes to validate vendor performance and reporting.