VA 'relinquished oversight' of IT projects under agreement

A Veterans Affairs Department internal report released on Thursday found numerous contracting irregularities resulting from an agreement VA signed with the Space and Naval Warfare Systems Center to develop information technology systems, including a high-profile network to process veterans' educational benefits claims, which has a deadline for completion in August.

VA signed an interagency agreement with SPAWAR in November 2007 for the center to provide VA with system development, software programming and project management support. The department has issued 22 so-called amendments against the agreement, representing 30 IT projects, for a total cost of $66 million, according to a report issued by the VA inspector general. Another $73 million worth of IT work is in the pipeline.

But the IG found that VA had not conducted an analysis as required by the Federal Acquisition Regulation as to whether awarding IT contracts to SPAWAR "is in the best interest of the government." The IG also concluded that SPAWAR, not VA, developed requirements for IT projects that "were often broad and general in nature and lacked specific deliverables."

VA also did not know specifics about the agreement, including the fact that SPAWAR was conducting work outside the scope of the agreement and that the center had contracted out 87 percent of the work to outside contractors. These companies subcontracted out the work to other SPAWAR subcontractors, which increased costs because VA "must pay an additional layer of management fees and overhead," the IG said.

VA "could not tell us who was performing the work under the [agreement], how many people were providing services, or where they were located," the report noted.

The VA's Office of Enterprise Development was unaware VA was paying SPAWAR a 10 percent management fee, and the center was "unable to provide justification or authority to charge" the fee, the IG concluded.

By comparison, the General Services Administration charges a 3 percent management fee on IT contracts, and the Defense Information Systems Agency charges a 1.25 percent management fee. DISA plans to raise its fee to 2 percent in October.

The report concluded that VA had "relinquished its oversight of financial performance and work performed under the [agreement] to SPAWAR."

One of the key VA projects SPAWAR is working on is the development of a claims processing system to support the new GI bill, formally known as the 2008 Post 9/11 Veterans Educational Assistance Act.

But the formal statements of work for the GI bill system consisted of "essentially boilerplate" requirements, which SPAWAR developed and did not address the work the center was supposed to do, the IG reported.

Rep. Steve Buyer, R-Ind., the ranking member of the House Veterans Affairs Committee, who requested the IG investigation, said in a statement that problems identified in the report could "seriously jeopardize timely delivery of the Post 9/11 GI bill program."

"I want assurance that VA is prepared to handle the thousands of claims it will receive for education benefits," he said in a statement released on Thursday. "VA must take immediate action to get the contracting mess with SPAWAR straightened out."

Buyer said he asked the IG to "provide me with an in-depth briefing, but it is clear from this disturbing report that VA desperately needs strong and specific reform in their acquisition operations."

Stephen Warren, principal deputy assistant secretary in the VA's Office of Information and Technology, said that it was unfair to compare the management fees charged by GSA with the higher fees the VA pays SPAWAR. "We did not bring them [SPAWAR] on as a contract management agent," he said. "We are paying them for expertise and consider them a partner."

Warren said he found it "problematic" that SPAWAR was subcontracting out VA work, particularly "if we are paying extra fees."

The IG recommended VA's Office of Information and Technology craft more clearly defined statements of work for SPAWAR under the agreement and that its Office of Enterprise Development establish a method of determining reasonable cost estimates and improving oversight of contracts to third parties.

Warren said the Office of Information Technology considers IG reports as guidance to "help us do our job better" and will work on implementing its recommendations.

Harold Gracey, a consultant with Vienna, Va.-based Topside Consulting who served as VA chief of staff from 1994 to 1998, said he hopes the problems detailed in the IG report are history and that Roger Baker, the new chief information officer, can straighten out how the department manages IT contracts.