Figure 1 shows  the organizational structure of the procurement function at VA.

		MSPV-NG Program

For over a decade, each of VA’s 170 medical centers used VHA’s legacy  MSPV program to order medical supplies, such as bandages and  scalpels. Supply Chain Practices Identified by Selected Leading Hospital Networks

Leading hospital networks we spoke with have similar goals to VA in  managing their supply chains, including clinical standardization and  reduced costs. VHA’s Implementation of MSPV-NG Program Has Not Yet Achieved Its Goals

VHA’s implementation of the MSPV-NG program—from its initial work to  identify a list of supply requirements in 2015, through its roll-out of the  formulary to medical centers in December 2016—was not executed in line  with leading practices. Initial Formulary and Unclear Communication Contributed to a Lack of Medical Center Buy-In for MSPV-NG Implementation

Once VA’s MSPV-NG initial formulary was established in December  2016, each medical center was charged with implementing it. Officials stated that the current metric does not provide  enough information and, as a result, VHA is in the process of preparing a  new metric to more precisely assess MSPV-NG use and effectiveness,  and has begun conducting routine surveys of its medical centers to obtain  their feedback on MSPV-NG. Officials stated the broader metric was more useful than measuring cost  avoidance specific to MSPV-NG. VA is also exploring major changes in its contracting strategy for MSPV- NG. For instance, one medical center procured medical gas on  an emergency basis through consecutive non-competitive contracts. This was  followed by a series of non-competitive bridge contracts to that incumbent  vendor over a 3-year period. Funding Issues

Funding uncertainty also contributed to three awards being designated as  emergencies. In all nine cases, however, there  was no competition at all, which puts the government at risk of paying  more than it should for goods and services. In addition, local  VISN Network Contracting Offices have also not used available data on  emergency purchases to identify items frequently purchased on an  emergency basis. However, VA may face challenges in this new approach until it addresses  the existing shortcomings in the MSPV-NG program, such as the absence  of a documented overall strategy, insufficient clinician involvement in the  requirements development process, and lack of medical center buy-in. Meanwhile, among the 18 contract actions we reviewed, we found  shortcomings in planning and communication that led to medical centers’  overreliance on emergency procurements to obtain routine goods and  services—some of which could be made available via MSPV-NG— bypassing effective contracting practices like competition. Recommendations for Executive Action

We are making 10 recommendations to VA. The Director of the MSPV-NG program office should, with input from the  Strategic Acquisition Center (SAC), develop, document, and  communicate to stakeholders an overarching strategy for the program,  including how the program office will prioritize categories of supplies for  future phases of requirement development and contracting. Appendix I: Objectives, Scope, and Methodology

You requested that we examine the Department of Veterans Affairs’ (VA)  transition to the Medical Surgical Prime Vendor-Next Generation (MSPV- NG) program and the extent to which the department contracts for good  and services on an emergency basis. This report addresses the extent to  which: (1) VA’s implementation of MSPV-NG was effective in meeting  program goals, and (2) Veterans Health Administration (VHA) awards  contracts on an emergency basis for routine supplies and ongoing  services, and what impact, if any, these awards have on VHA’s  acquisition function. We selected a non-generalizable sample of 18 contracts from the three  selected VISNs.
Why GAO Did This Study

VA medical centers spend hundreds of millions of dollars annually on medical supplies and services. In December 2016, VA instituted a major change in how it purchases medical supplies—the MSPV-NG program—to gain effectiveness and efficiencies.
GAO was asked to examine VA's transition to the MSPV-NG program and its use of emergency procurements. This report assesses the extent to which (1) VA's implementation of MSPV-NG was effective in meeting program goals, and (2) VA awards contracts on an emergency basis. GAO analyzed VA's MSPV-NG requirements development and contracting processes, and identified key supply chain practices cited by four leading hospital networks. GAO also reviewed a non-generalizable sample of 18 contracts designated in VA's database as emergency procurements with high dollar values; and met with contracting, logistics, and clinical officials at 6 medical centers, selected based on high dollar contract obligations in fiscal years 2014-2016 and geographic representation.

What GAO Found

The Department of Veterans Affairs (VA) established the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program to provide an efficient, cost-effective way for its facilities to order supplies, but its initial implementation was flawed, lacked an overarching strategy, stable leadership, and sufficient workforce that could have facilitated medical center buy-in. VA developed requirements for a broad range of MSPV-NG items with limited clinical input. As a result, the program has not met medical centers' needs, and usage remains far below VA's 40 percent target. VA also established cost avoidance as a goal for MSPV-NG, but currently only has a metric in place to measure broader supply chain cost avoidance, not savings specific to MSPV-NG. Also, starting in June 2015, VA planned to award competitive contracts for MSPV-NG items, but instead, 79 percent were added using non-competitive agreements. (See figure.) This was done primarily to meet VA's December 2016 deadline to establish the formulary, the list of items available for purchase through MSPV-NG.
The roll-out of MSPV-NG ran counter to practices of leading hospitals that GAO spoke with, which highlighted key steps, such as prioritizing supply categories and obtaining continuing clinician input to guide decision-making. VA has taken steps to address some deficiencies identified in the first phase of implementation and is considering a new approach for this program. However, until VA addresses the existing shortcomings in the MSPV-NG program, such as the lack of medical center buy-in, it will face challenges in meeting its goals.
Medical centers often rely on emergency procurements to obtain routine goods and services—some of which could be made available at lower cost via MSPV-NG. Sixteen of the 18 contracts in GAO's sample were not competed, which puts the government at risk of paying more. For instance, one medical center procured medical gas on an emergency basis through consecutive non-competitive contracts over a 3-year period. VA policy clearly defines emergency actions; however, inefficiencies in planning, funding, and communication at the medical centers contributed to emergency procurements, resulting in the contracting officers quickly awarding contracts with no competition.

What GAO Recommends

GAO is making 10 recommendations, including that VA expand clinician input in requirements development, calculate MSPV-NG cost avoidance, establish a plan for awarding future competitive contracts, and identify opportunities to strategically procure supplies and services frequently purchased on an emergency basis. VA agreed with GAO's recommendations.