VA’s Noncompliance with Preaward Review Requirements for Sole-Source Proposals for Healthcare Services

VA spends millions of taxpayer dollars annually on healthcare resources procured without competition from affiliated educational institutions. This review focused on determining the extent of VA’s compliance with the requirement to obtain an Office of Inspector General (OIG) preaward review of healthcare resource proposals from affiliated institutions and the potential monetary impact for any noncompliance. Preaward reviews generally provide VA with pricing recommendations based on the affiliate’s actual expenses of providing the services and are used by VA contracting officers to negotiate fair and reasonable prices for the government and taxpayers. The OIG found VA awarded 227 contracts with a total value of $278.5 million without the required OIG preaward review for contracts above $500,000, which represents 63 percent of the contracts during the 5-year review period. A review of contract files and other sources revealed that contracting officers awarded contracts just below the review threshold and used a series or extended interim contracts to circumvent the review requirements. VA did not consider the monetary value of extending the contract periods when determining the value of the proposals and repeatedly used interim contracts to procure healthcare services without the required OIG preaward review. Additionally, contracting officers did not consistently document that the negotiated price was fair and reasonable, as required. The OIG recommended the Veterans Health Administration executive director for procurement ensure that contracting officers request preaward reviews for all sole-source healthcare resource contracts that exceed $500,000, require an OIG preaward review for all interim contracts that exceed the threshold, and mandate an immediate postaward review for any sole-source contract awarded on an interim basis as an emergency contract.