Audit of Veterans Health Administration Open Market Medical Equipment and Supply Purchases

The Office of Inspector General conducted an audit to evaluate open market purchases made from Federal Supply Schedule (FSS) medical equipment and supply vendors. The audit objectives were to determine if Veterans Health Administration (VHA) medical facilities purchased items on the open market when identical or like items were available for purchase through an existing FSS at a lower price and to assess the effectiveness of controls over VHA open market procurements. During the audit, we reviewed 1,667 open market purchases made by 21 VISNs and 199 medical facilities from 20 FSS medical equipment and supply vendors during the 12-month period ending April 30, 2008; interviewed VHA officials; and examined medical equipment and supply procurement policies, procedures, and management controls during onsite visits. We found that increased usage of the FSS and improved oversight would reduce unnecessary open market medical equipment and supply purchases and VA’s health care item costs by about $8.2 million annually or $41 million over 5 years. Veterans Integrated Service Network (VISN) and medical facility purchasing staff opted to use the open market instead of the FSS because they lacked the knowledge, information, and proper tools to use the FSS effectively. In addition, national and local management controls over open market procurements and the FSS waiver process needed to be strengthened to ensure that VISNs and medical facilities purchase medical equipment and supplies in accordance with Federal regulations and VA policy. In the audit report, we made four recommendations to strengthen the management controls over open market purchases. The Acting Under Secretary for Health and the Executive Director for the Office of Acquisition, Logistics, and Construction agreed with the findings and recommendations and provided acceptable implementation plans. We will follow up on the planned actions until they are completed.