A congressional subcommittee on Wednesday gave fair warning to the Veterans Health Administration to make sure its purchasing agents are not splitting up hundreds of thousands of dollars worth of acquisitions in order to avoid federal contracting rules.
"Numerous contacts reviewed by this subcommittee shows VHA purchasers splitting purchases in order to remain under the set-price threshold for purchases ," Rep. Bill Johnson, R-Ohio, told a senior VHA official during a hearing on the agencies purchase of prosthetics. "In one case 12 purchases went to the same company for the same products from the same contracting officer, one right after the other."
"Why is VHA not aggregating their micro-purchases?" Johnson asked.
Phil Matkovsky, assistant deputy undersecretary for health and administrative operations at VHA, did not directly answer the question but confirmed that breaking up large purchases into multiple smaller buys to avoid tripping federal acquisition thresholds is "not appropriate."
"So if that is occurring that is not condoned practice," he said.
Matkovsky said VHA would monitor the actions of its agents to ensure it does not happen. He also said purchasing supervisors already are supposed to be doing this.
"We've got page after page of examples of that kind of thing," Johnson warned. "We take that kind of thing very seriously."
Poor oversight of such purchases was highlighted in a recent Department of Veterans Affairs Inspector General report on prosthetics purchases. That investigation looked at purchases of traditional prosthetics such as artificial limbs.
The IG found the VA had overspent by more than $2 million in 2010 – the most recent numbers available – and could expect to lose an additional $2 million annually for the coming four years unless it got a better handle on its spending.
The same spending patter exists elsewhere in VHA, according to interviews that Military.com conducted in April with two sources representing sellers of biological medicines to VHA. Biologics are medicines manufactured from human bone and tissue, and are used in a variety of medical procedures.
According to information they provided to Military.com, VHA purchasing agents operating out of the New York-New Jersey area made multiple buys – including for medical equipment and office furnishings – from the same vendors on the same dates for the same products. Though the totals ran into several thousand dollars, the purchases were divided so that no single one exceeded the $25,000 limit that an agent was be permitted to make before having to put out a contract to bid and document it, according to the sources.
One reason VHA was called in before the subcommittee on Wednesday was its practice of defining biologics as prosthetics, an interpretation that enabled it to ignore federal contracting rules requiring competitive bids and simply buy the products from a few large corporations.
In advance of the Wednesday hearing Matkovsky issued a memo to VHA purchasing agents telling them to follow contracting laws – Federal Acquisition Regulation and Veterans Administration Acquisition Regulation -- from now on.
Matkovsky said VHA will still factor in a veteran's preference and a doctor's prescription when it comes to purchasing biologics non-competitively – but otherwise will adhere to the law.
Others at Wednesday's hearing testified that there is little or no difference in biologics, and that neither patients nor doctors would be inclined to prefer one company supplier over another.