VA Acquisition Management: Actions Needed to Improve Management of Medical-Surgical Prime Vendor Program and Inform Future Decisions
Fast Facts
The Department of Veterans Affairs intends the Medical Surgical Prime Vendor program to be the primary supply source for its 170 medical centers. But only 11% of centers met the VA's target for using the program.
The VA plans to revamp the program to fix some problems—like delivery delays and limited supply selection—but that has been delayed. The VA is piloting a similar DOD medical supply program at selected medical centers and has decided to expand it VA-wide but has yet to determine whether the pilot is successful.
We made 8 recommendations to the VA, including that it develop a plan for assessing the success of its DOD supply pilot.
Supply Room in a Veterans Affairs Medical Center
Highlights
What GAO Found
The Department of Veterans Affairs' (VA) Medical-Surgical Prime Vendor-Next Generation (MSPV-NG) program is intended to provide an efficient, cost-effective way for its 170 medical centers to order supplies. But only 11 percent of these centers met VA's target of using the MSPV-NG formulary—the list of supplies offered—for 90 percent of medical supply purchases. GAO met with 12 medical centers and found contributing factors, such as a manual formulary management system, that resulted in ordering errors and delivery delays. VA's planned MSPV 2.0 program is designed to fix some, but not all, issues. The manual formulary management system, among others, will remain unaddressed.
In addition, GAO found that supplies shipped directly from manufacturers instead of local warehouses—known as drop shipments—often result in late deliveries (see figure). About a third of supplies on the MSPV-NG formulary are drop-shipped, and this issue will continue under MSPV 2.0, as reducing drop-shipped items is not part of VA's planned changes under the new program.
Out-of-Stock Notices Observed in VA Medical Center Supply Storage Areas
VA is also piloting the use of the Defense Logistics Agency's (DLA) MSPV program at three VA medical centers to determine whether it provides a more effective means of obtaining required medical and surgical supplies than MSPV 2.0. VA started the pilot at one location but delayed rollout to the other locations by almost a year, to July and August 2020, because of technology integration challenges. VA has not established comprehensive metrics or criteria from which to determine the pilot's success or whether the pilot could be scalable to medical centers VA-wide. Without these metrics, VA risks not having an effective methodology for evaluating pilot success.
In September 2020, after GAO sent a draft of this report to VA for comment, senior VA officials stated VA has decided to implement DLA MSPV VA-wide in place of MSPV 2.0, and will continue to implement MSPV 2.0 in the interim. This planned approach makes assessing the outcomes of the implementation at the initial sites all the more important, to help VA understand potential challenges.
Why GAO Did This Study
VA is developing the next iteration of its prime vendor program, MSPV 2.0, to meet the healthcare needs of about 9 million veterans. GAO's prior work found that VA medical centers' use of the MSPV formulary fell below targets in VA's prior iteration of the program and that VA lacked an overarching medical supply program strategy. In 2019, GAO elevated VA Acquisition Management to its High Risk List, in part due to its lack of an effective strategy for procuring medical supplies.
GAO was asked to review VA's MSPV program. This report assesses, among other things, VA medical centers' use of MSPV-NG and whether MSPV 2.0 will mitigate current program issues, as well as whether VA has measures for DLA MSPV pilot success and scalability. GAO analyzed VA and DLA documents and data, conducted site visits to 12 VA medical centers with higher medical supply spending, and interviewed VA and DLA officials within various levels at the agencies. GAO completed most of this review prior to March 2020, and, thus, did not address the COVID-19 pandemic.
Recommendations
GAO is making eight recommendations to VA, including that it examine opportunities to automate aspects of the formulary management process, reduce the number of drop-shipped items, and develop a plan to measure the success and scalability of its DLA MSPV pilot. VA agreed with GAO's recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Veterans Affairs | The Secretary of Veterans Affairs should ensure the Executive Director of the Veterans Health Administration's Office of Procurement and Logistics, as part of the Veterans Health Administration's ongoing efforts to establish and maintain supplier agreements for the Medical-Surgical Prime Vendor 2.0 formulary, examines opportunities to reduce the number of items delivered via drop shipment to minimize less-preferred methods to purchase supplies. (Recommendation 1) |
VA concurred with this recommendation. In April 2021, VA stated that drop shipments are necessary in some circumstances, and that they are already rare under the Medical-Surgical Prime Vendor (MSPV) program. Additionally, in July 2022, VA conducted analysis of use of drop shipments for infrequently-ordered items. However, as we reported in September 2020, logistics staff at medical centers consistently reported a number of challenges stemming from frequent MSPV drop shipments. In July 2022, VA developed a new backorder report that will be used to identify issues such as backorders that contribute to greater use of drop shipments of specific items, so that officials at the program office, contracting office, medical centers, and prime vendors can take action. VA shared examples of these reports with GAO. In addition, the draft solicitation for VA's planned new iteration of the MSPV program indicates that it will require vendors to maintain aggregate in-stock inventories, which VA officials stated will lead to further reductions in drop shipments. Based on these actions, VA met the intent of this recommendation.
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| Department of Veterans Affairs | The Secretary of Veterans Affairs should ensure the Executive Director of the Veterans Health Administration's Office of Procurement and Logistics, as part of the Veterans Health Administration's ongoing efforts to establish and maintain supplier agreements for the Medical-Surgical Prime Vendor 2.0 formulary, examines opportunities to establish delivery time frame requirements for drop-shipped items. (Recommendation 2) |
VA concurred with this recommendation. In July 2022, VA provided contract documentation showing that under the Medical-Surgical Prime Vendor program, VA requires prime vendors to establish agreements with their suppliers that set delivery timeframe requirements for drop-shipped items. In May 2023, VA stated that the agency considered options for setting time-frame requirements and would remain more focused on reducing the number of drop-shipped items. Based on the actions taken by VA toward this wider goal of reducing the overall role of drop shipments, VA has met the intent of this recommendation.
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| Department of Veterans Affairs | The Secretary of Veterans Affairs should ensure the Executive Director of the Veterans Health Administration's Office of Procurement and Logistics automates aspects of the manual Medical-Surgical Prime Vendor formulary management process where feasible, such as electronic transmittal of real-time updates to medical centers and prime vendors, to minimize ordering errors and delivery delays. (Recommendation 3) |
VA concurred with this recommendation. In March 2023, VA finalized the Statement of Work for next generation of the Medical Surgical Prime Vendor Program. The Statement of Work stated that some aspects of formulary management would be automated in the next generation of the program. VA has met the intent of this recommendation.
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| Department of Veterans Affairs | The Secretary of Veterans Affairs should ensure the Executive Director of the Veterans Health Administration's Office of Procurement and Logistics and the Strategic Acquisition Center develop processes to routinely use transaction-level data to validate prime vendor performance on key program metrics, such as order completion rate, and identify how this information will be used to oversee the prime vendors. (Recommendation 4) |
VA concurred with this recommendation. In July 2022, VA provided documentation of planned changes to the next iteration of its prime vendor contracts that would provide VA the ability to independently calculate prime vendor performance on key metrics such as order completion date. In March 2023, VA finalized the statement of work for the next generation of the Medical Surgical Prime Vendor Program. This statement of work stated that new electronic data integration reports would give VA the ability to independently calculate and verify completion rates. VA has met the intent of this recommendation.
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| Department of Veterans Affairs | The Secretary of Veterans Affairs should ensure the Executive Director of the Veterans Health Administration's Office of Procurement and Logistics develops a process for calculating accurate historical coverage and utilization data for the Medical-Surgical Prime Vendor program, such as archiving monthly formulary snapshots, to increase visibility into medical center needs and issues over time. (Recommendation 5) |
VA concurred with this recommendation. As of September 2020, VA began archiving historical formulary snapshots. As of July 2022, VA has established and documented a standard operating procedure for Medical-Surgical Prime Vendor program office staff to use these snapshots to increase visibility into medical center needs and issues over time.
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| Department of Veterans Affairs | The Secretary of Veterans Affairs should ensure the Executive Director of the Veterans Health Administration's Office of Procurement and Logistics develops a plan for assessing the results of the Defense Logistics Agency Medical-Surgical Prime Vendor pilot, including criteria for assessing pilot success and scalability, as well as performance metric targets, and use these criteria and metrics to inform the department's future decision on whether the program should be deployed to all medical centers. (Recommendation 6) |
VA concurred with this recommendation. In May 2023, VA issued guidance that stated Veterans Integrated Service Networks (VISNs) must transition away from DLA MSPV to the VA MSPV Gen-Z V1 MSPV contract after the VA Strategic Acquisition Center (SAC) awards their VISN Delivery Order. The guidance also stated that VISN 20 is currently using the DLA MSPV under continuation of the pilot program and must transition from DLA MSPV to VA MSPV upon award of the VA MSPV Gen-Z V1 VISN 20 Delivery Order. VA's statement that it will not move forward with DLA MSPV in the future addresses the intent of the recommendation to clarify the basis on which VA will make future decisions about its usage of DLA MSPV.
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| Department of Veterans Affairs | The Secretary of Veterans Affairs should ensure the Executive Director of the Veterans Health Administration's Office of Procurement and Logistics seeks input from stakeholders within the agency, such as the Office of Small and Disadvantaged Business Utilization and medical center staff, on operation of the Defense Logistics Agency Medical-Surgical Prime Vendor pilot to help inform any needed improvements as the pilot progresses. (Recommendation 7) |
VA concurred with this recommendation. In July 2022, VA provided documentation showing that it has established mechanisms for stakeholders such as the Office of Small and Disadvantaged Business Utilization to provide input on the next iteration of its Medical-Surgical Prime Vendor program via an integrated project team. However, VA had not developed a mechanism to involve these stakeholders in decision-making regarding the Defense Logistics Agency (DLA) prime vendor program. Subsequently, VA stated in a memo dated May 22, 2023 that it was discontinuing the pilot of the DLA MSPV program referenced in the recommendation. The memo directed medical networks to use the VA's MSPV Gen Z program instead of DLA MSPV. VA stated that they could not fully implement this recommendation as a result of the decision documented in the memo. While VA has continued to pursue its own MSPV program, key stakeholders were already engaged with that process. As a result, GAO would no longer make this recommendation today because the DLA MSPV pilot program no longer exists, and the key stakeholders referenced in the recommendation are involved in the remaining program.
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| Department of Veterans Affairs | The Secretary of Veterans Affairs should ensure the Executive Director of the Veterans Health Administration's Office of Procurement and Logistics works with the Office of Small and Disadvantaged Business Utilization to provide written guidance to VA logistics officials at facilities participating in the Defense Logistics Agency Medical-Surgical Prime Vendor pilot program on how to prioritize veteran-owned small businesses when purchases are made through the pilot program, to achieve VA's goal of providing opportunities for these firms to participate in the pilot program. (Recommendation 8) |
VA concurred with this recommendation. In June 2021, VA provided a briefing to logistics staff on ordering from veteran-owned small businesses through the Defense Logistics Agency's Medical-Surgical Prime Vendor program. However, this briefing did not provide complete guidance on how to apply VA's preferences for veteran-owned small businesses. Subsequently, in May 22, 2023, VA stated in a memo that it was discontinuing the pilot of the DLA MSPV program referenced in the recommendation. The memo directed medical networks to use the VA's MSPV Gen Z program instead of DLA MSPV. While VA has continued with development of successor versions of its own MSPV program, the issue of guidance on how to apply its policies in the context of another agency's program is no longer applicable. As a result, we would no longer make this same recommendation today.
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