VA must modernize supply chain amid COVID-19, GAO says

National Guard COVID products
National Guard COVID products

Oklahoma Air National Guard/Tech. Sgt. Kasey Phipps/Flickr cc

In the Government Accountability Office's (GAO's) latest report yesterday, the agency recommends that the Department of Veteran Affairs (VA) develop a supply chain management strategy, including an explanation of how all its supply chain initiatives relate to each other.

Currently, the VA's main supply chain initiatives are around implementing the Department of Defense's (DOD's) Defense Medical Logistics Standard Support (DMLSS) inventory system, creating four regional readiness centers for critical medical supplies, and participating in the Defense Logistics Agency (DLA) Warstopper Program, which would increase its access to critical medical supplies during emergencies. However, as GAO notes throughout the report, these efforts are either in their early stages or have already been delayed.

GAO has labeled the VA's acquisition management as an area of high risk since March 2019. Of the 49 recommendations GAO has made to improve VA acquisition management since 2015, the VA has agreed with all and implemented 22.

Unfulfilled, modified contracts during COVID

Like other organizations during COVID-19, the VA has had difficulties acquiring medical supplies, including personal protective equipment (PPE), especially during the early stages of the pandemic.

The VA has obligated roughly $4.2 billion for COVID-related products and services as of May 2021, but the report says roughly 66% and 31% of product and service contracts, respectively, were modified or terminated. The authors found that 11 contracts were terminated for cause, 5 were terminated for convenience, and 806 experienced reductions in price or quantity. They add, "In comparison, for the 5 years spanning fiscal years 2015 to 2019, VA reported terminating 105 contracts for cause, for a total of $11.4 million versus $39 million in the 15 months spanning March 2020 through May 2021."

Two instances of contract modification were highlighted in the report, one of PPE not meeting standards upon arrival, and another where PPE set to depart from China to the United States was seized by the China government for local use.

To help secure the medical supply chain, the VA began to screen vendors for capability and capacity. The department also integrated Federal Acquisition Regulation–based emergency flexibility and began partnering with the Federal Emergency Management Agency and with Defense Production Act–related efforts. The VA even created an automated business intelligence tool to better track VA medical center inventory and assist with purchasing decisions, GAO reported.

Even with these efforts, though, the VA was still working off an outdated inventory system that could not automatically track critical supplies at VA medical centers.

Three initiatives made more urgent in face of pandemic

The VA has been working on updating its inventory management system since October 2019 with full implementation of the DMLSS in 2027. Before COVID-19, the authors write that the timeline was in jeopardy. However, because of the pandemic's urgency and related supplemental funds, officials are hoping to accelerate the timeline and achieve full implementation by 2025.

"Until the [DMLSS] system is rolled out in all 170 medical centers VA will continue to use an outdated system that does not provide needed functionality to track medical and surgical supplies, including critical COVID-19 supplies," they write.

The other two initiatives deal with critical medical supply access across different parts of the supply chain system.

The Veterans Health Administration also wants to eventually reduce its nine interim sites to four geographically dispersed, fully operational regional readiness centers that manage 120 days' worth of PPE and other critical supplies. The idea is to have two of the sites owned and operated by the DLA and the other two owned and operated by DLA contractors. Two of the sites will be in California and Pennsylvania, but the sites for the Midwest and the South region have not been decided yet, according to the report.

While the authors write that the VA was working on closing three of its interim sites as of March 2021, it also notes that the overall target date has been extended from 2022 to 2023 as the VHA deals with pandemic disruptions, supply chain constraints, budgetary issues, and a lack of a supply chain management system. In addition, the VHA has to figure out operations, total cost and funding means, and more detailed implementation.

More upstream on the supply chain, the VA wants to participate in the Defense Logistics Agency's Warstopper Program, which uses targeted investments to guarantee surge production and inventory. According to GAO, the VA has wanted to be a part of the program since June 2020, but still unknown is the timeline of any implementation, the funding needed, the range of products the VA would be working with, and how it would work in conjunction with the regional readiness.

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