VA abruptly cancels key software contract for joint health record

This story has been updated.

Yesterday, the Veterans Affairs Department abruptly terminated a $102.6 million contract awarded to ASM Research in January to develop software vital to an integrated electronic health record system that will serve both VA and the Defense Department.

A VA spokeswoman confirmed the contract cancellation, but provided no details. Industry sources told Nextgov that VA was concerned about potential organizational conflicts of interest and violations of federal contracting law, due to the fact that one or more ASM subcontractors had inside, nonpublic information about the procurement when it was put out for bid.

ASM has not responded to a request for comment from Nextgov.

VA Chief Information Officer Roger Baker said in an interview with Federal Times in early February that the contract with ASM called for the company to develop a middle layer of software for the integrated electronic health record (iEHR) called an enterprise service bus, which he described as "the heart of the iEHR." Baker said the ASM software would ensure any application could communicate with any database in the iEHR.

The department awarded ASM the contract as a task order off its $12 billion Transformation Twenty-One Total Technology, or T4, contract for a range of information technology services in July 2011. Industry sources told Nextgov that Harris Corp., SAIC, SRA International and 7 Delta, a disabled veteran-owned small business, submitted competing bids for the service bus contract.

Top leadership of VA and Defense agreed to develop the iEHR in March 2011. Last Friday, in his monthly press call, Baker said the enterprise service bus contract was the first large contract jointly executed by the two departments for the health record project. "It's the first major acquisition that we went out and did together to establish a standard piece of the iEHR," he said.

Industry sources told Nextgov that the organizational conflict of interest that led to the termination of the contract stemmed from officials who worked for the Military Health System at the time the contract went out for bid in October 2011 and who now work for ASM subcontractors.

VA canceled the ASM contract one day after Veterans Affairs Secretary Eric Shinseki and Defense Secretary Leon Panetta met at the Pentagon to discuss joint projects, including the electronic health record. Shinseki said after that meeting, "The vision Secretary Panetta and I share is to provide an integrated, seamless experience to our people across their lifetime -- from when they raise their hand to take the oath, to when they leave active service and join the veteran ranks, to when they are laid to rest with final honors . . . Over the past three years, VA and DoD have made significant progress, but more work remains."

An earlier version of this story incorrectly stated that HP Enterprise Services bid on the contract in question. The company is a T4 contractor, but did not bid on the enterprise service bus task order. The story has been corrected.