House lawmakers concerned half of VA’s IT contracting dollars going to 10 companies

The Department of Veterans Affairs is ramping up IT spending across several major projects, but those contracting dollars are increasingly concentrated amongst ...

The Department of Veterans Affairs is ramping up IT spending across several major projects, but those contracting dollars are increasingly concentrated amongst a handful of large companies.

VA’s annual IT obligations increased from $4.2 billion in 2017 to $6.5 billion in 2021, but the number of companies receiving those awards fell by more than 50%.

The Government Accountability Office found in a recent report that half of VA’s IT obligations in 2021 went to only 10 contractors — up from 45% in 2017. More broadly, about 75% of VA’s IT obligations went to 30 contractors.

Members of the House VA Committee are wary that the VA, one of the biggest spenders on IT in the federal government, isn’t holding these major contractors accountable for performance.

Lawmakers are also concerned that the current contracting environment at VA doesn’t give smaller firms a chance to break into the federal marketplace.

VA’s IT obligations to service-disabled, veteran-owned small businesses, for example, increased by almost 30% between 2017 to 2021, but the number of such contractors fell by 10%.

Shelby Oakley, the director of contracting and national security acquisitions at the Government Accountability Office, told lawmakers that the VA is awarding fewer new contracts, but issuing modifications or task orders on existing contracts more frequently.

VA’s acquisition management has been on GAO’s high-risk list since 2019.

GAO has yet to release a report with updated fiscal 2022 spending, but Oakley said the same spending trends are continuing.

VA’s increased IT spending in recent years stems from several ongoing modernization projects — including its Financial Management Business Transformation and the rollout of a new Electronic Health Record from Oracle-Cerner.

The VA’s response to the COVID-19 pandemic also drove much of this growth in IT spending.

The VA’s contracting habits are part of a larger trend across the federal government.  Agencies are breaking new records every year, in terms of the total federal contracting dollars going to small businesses. But the number of small firms actually getting government contracts shrank by more than 40% since 2010.

Subcommittee Chairman Matt Rosendale (R-Mont.) said VA is not unique in terms of this trend, “but as one of the largest IT buyers in the federal government, it is a striking example of how the system operates.”

“What you will not find in this system is much accountability. This is why IT projects, meant to modernize how services are delivered to our veterans, stumble again and again,” Rosendale said.

Rosendale said agencies need to do a better job of understanding the barriers that discourage new entrants to the federal marketplace.

He also said the VA’s widespread practice of putting out enormous, multi-year contract vehicles excludes small businesses but makes it easy for the same large firms to keep doing business with the agency.

“Either the supplier base has to expand, or some of these companies have to be barred from holding certain future contracts,” Rosendale said.

Hana Schank, former U.S. Digital Service director of product and UX research for the Department of Homeland Security, now a senior adviser at New America, said agencies aren’t holding vendors to the same performance standards as the private sector.

“In government delivering the product is the end. You don’t have to deliver it well, you don’t have to deliver it in a way that improves accessibility. In the private sector, there are metrics that you would use to say, ‘Did this achieve our goals?’ But in government, the goal is very often just launching the system and not how well it performs and what the outcomes are,” Schank said.

In March, GAO reported that many of VA’s IT contracts were not being reviewed or approved as required by the agency’s chief information officer. GAO  found that VA awarded almost 12,000 new IT contract actions between March 2018 and Sept. 2021, but VA didn’t provide evidence of CIO approval for 35% of these contracts.

In a sampling of these unapproved actions, GAO found that a majority were approved by non-IT-focused contracting shops. To address this, GAO recommended that VA implement an automated reminder for contracting officers to obtain the CIO approval for IT procurements.

“This should ensure that VA CIO has the opportunity to provide input on current and planned IT Acquisitions and help avoid awarding contracts that are poorly conceived or duplicative,” Oakley said.

While the federal government has largely shifted to contracting out IT expertise and solutions, rather than developing new systems in-house, Oakley said agencies still need tech-savvy leaders to understand IT needs and what they’re getting from vendors.

“I think there is a happy medium that requires the government to have expertise to understand what it’s buying, what it’s getting and what its customers need to be able to put in place contractors, the private sector to be able to do those things,” she said.

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