VA farmed out claims system work to controversial Navy organization

The Veterans Affairs Department has paid the Space and Naval Warfare Systems Center Atlantic $105 million to help develop its next-generation disability claims processing system since 2010, despite two internal watchdog reports in 2009 that blasted previous work done by the Charleston, S.C.-based organization for VA.

This amounts to roughly 21 percent of the total $491 million budget for the Veterans Benefit Management System planned for nationwide deployment this year.

VA Secretary Eric Shinseki views VBMS as the key to eliminating the claims backlog by 2015. The department ended the year with 900,121 backlogged claims, 608,365 of which -- 68 percent -- had been stuck in the system more than 125 days.

VA Chief Information Officer Roger Baker said in response to an email from Nextgov that SPAWAR Atlantic provides engineering, agile development, operations, help desk, project management office support and testing for VBMS. He said this is part of an acquisition strategy that includes interagency partners as well as VA contractors in direct support to develop and integrate multiple components included in VBMS.

He said SPAWAR Atlantic is “expected to remain a vital part of the VBMS team” based on the organization’s “strong performance” on the program as well as its previous strong performance on the post 9/11 GI Bill education benefit program.

Baker declined to detail the fees VA has paid SPAWAR Atlantic for its work on VBMS. The organization operates under a working capital fund much like a business. In a statement, Baker said SPAWAR Atlantic “is paid for its direct government labor at fixed rates [plus] costs associated with materials, travel, etc.”  

The department’s inspector general, in a June 2009 report on an interagency agreement VA signed with SPAWAR Atlantic in 2007, described program management fees that run between 10 and 13 percent.

VA personnel never questioned the 10 percent fee, the IG said, nor was there a decrease in the rate charged by SPAWAR when its VA work jumped from $2.5 million to $66 million. “Given the fact of the substantial increase in work ordered by VA, we would expect that some economies of scale would be achieved to decrease the [program management] fee,” the report said.

In a follow-on August 2009 report on engineering work SPAWAR Atlantic was commissioned to do on a replacement for a botched patient scheduling application, the IG said, “We do not believe this to be a viable solution because our review of the SPAWAR contract found that most of the work was being performed by contractors, not SPAWAR government employees.”

In at least one instance on the VBMS program VA may have been hit with an additional contract fee due to the way SPAWAR Atlantic subcontracted work to L3 Communications Inc. VA has deployed VBMS in phases or small chunks at regional offices. In May 2012, SPAWAR awarded the company a contract for the final phase of work through a task order on the Defense Information Systems Agency’s umbrella Encore II information technology contract. DISA usually charges a 1.25 percent fee for task orders executed on its contracts.

Baker said L3 is the prime contractor supporting SPAWAR Atlantic on the VBMS program “and its subcontractors provide key support to include architecture design, requirements development, agile software development, testing support, and production operations support of the development, testing and operations environments.” He did not provide the value of the L3 contract.

SPAWAR Atlantic is an economic engine in South Carolina, and generated $3.3 billion for the state in 2011, according to a November 2012 report on military spending in the state by the South Carolina Department of Commerce.

Sen. Lindsey Graham, R-S.C., has been a strong supporter of SPAWAR Atlantic. Graham served for years on the Senate VA Committee until 2011, when he took a post on the Appropriations Committee. The command employs 3,673 people directly and its work supported another 23,819 jobs in the state.