Veterans Affairs Department investigators have launched 254 contracts-related criminal probes in the last five years that resulted in the arrests of 110 people, said Maureen Regan, counselor to the IG.

The investigations uncovered kickbacks and sweetheart deals among regional and local managers and vendors, she told the House Veterans Affairs Committee today.

Regan said many of the crimes could have been prevented or caught earlier by more oversight and accountability and a more centralized procurement organization at the department.

VA lacks a reliable centralized database to keep track of purchases. This means the department "cannot identify what it bought, who it bought it from and whether the products or services were received, or whether prices are fair and reasonable," Regan said.

The current database, called the electronic Contract Management System, contains information on purchases worth more than $25,000. But IG audits show only 17 percent of procurement actions that should have been logged into the database were there. Further, procurements made on VA's behalf by other agencies, such as the General Services Administration, are not reported to the database, making them invisible to oversight, she said.

"This lack of oversight within VA has been the common denominator in the criminal investigations involving procurement fraud we have conducted during the last five years," Regan said.

Inadequate oversight also allowed the department to award contracts meant for service-disabled veteran-owned small businesses to firms not owned by service-disabled veterans, said Gregory Kutz, managing director of forensic audits and special investigations for the Government Accountability Office.

A November case study released by GAO showed that 10 firms received $100 million in sole-source contracts meant for service-disabled veterans. Those firms were not qualified to participate in the preference program, squeezing out legitimate service-disabled veteran owned companies.

Organizations that misrepresent themselves as socio-economically disadvantaged entities are also more likely to make other misrepresentations to the government, such as overcharging for a product or service, Kutz said.

To address these oversight failings, Rep. Steve Buyer, R-Ind., the committee's ranking member, introduced on Dec. 8 the 2009 Department of Veterans Affairs Acquisition Improvement Act. If passed, the bill would establish a department-wide, streamlined acquisition plan. The plan would centralize all requirements development, soliciting, awarding and management for contracts under the chief acquisition officer, rather than under each of VA's administrations.

The chief acquisition officer (CAO) will also become an assistant secretary with seven deputies to oversee each of the following: information technology acquisition; Veterans Benefit Administration, National Cemetery Administration and headquarters acquisition; Veterans Health Administration acquisition; construction and leasing acquisition; medical supply contracts; acquisition policy; and asset management and logistics.

Glenn Haggstrom, the department's acting chief acquisition officer, said the department welcomes elevating the CAO to the assistant secretary level.

The department is already trying to improve oversight based on the recommendations of a 2008 PricewaterhouseCoopers study the department commissioned, he said. So far, it has:

• Centralized acquisition into four regional offices to provide focused training and oversight.

• Set up the VA Acquisition Academy to recruit and train acquisition professionals.

• Established a council to share best practices across VA and a board to review and monitor procurements worth more than $5 million.

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