The Coalition for Government Procurement was honored to testify this week before the House Committee on Veterans’ Affairs during a hearing on the Department of Veterans Affairs (VA) Medical/Surgical Prime Vendor (MSPV) program. The Veterans Health Administration and Government Accountability Office also testified.  The following is the oral statement provided by Coalition President, Roger Waldron. The written statement and a video are also available here.

Oral Statement

Chairmen Roe, Ranking Member Walz, and Committee Members, thank you for the opportunity to appear before you today.

The Coalition is a non-profit association of small, medium, and large commercial business concerns, representing more than $145 billion in annual government sales, including more than $12 billion in medical/surgical products and pharmaceuticals supporting veteran healthcare. 

Today, my remarks summarize my written testimony, which I ask be included in record.  

The MSPV program office serves as the “brains” of the VA’s logistical operations, because it touches essentially all critical VA healthcare operations and contractors. It is responsible for developing and communicating the MED/ SURG formulary, and thus, serves as the bridge connecting requirements holders (the VISNs, hospitals, and healthcare providers serving veterans) and the VA procurement professionals and contractors. 

Given this critical role/impact, it is imperative that the MSPV program office be led and managed by clinicians.  A clinically- led program office is a fundamental commercial best practice, and it is our understanding that the MSPV is the only medical supply chain in the VA and DoD that currently is not led by either clinicians, or medical supply chain experts. This structure has contributed to increased inefficiencies and generated medical care concerns.  Our members are seeing an incomplete formulary, which causes supply shortages, leaving facilities with no choice but to purchase items on the open market, often at suboptimal prices.   

Clinical leadership will result in well-defined requirements, thereby avoiding these problems, and supporting delivery of best value healthcare.  Without this leadership, many of challenges the Prime Vendor program will continue into the next iteration, with strategies and decisions that, too often, are driven primarily by acquisition process needs—rather than veteran healthcare needs.  

Turning to the next iteration, MSPV 2.0 essentially envisions outsourcing the program to a single, “Super Prime Vendor” that would determine what the agency buys and how the items sought will be sourced.  The Super Prime Vendor would develop the formulary, manage and distribute items, administer subcontracts, and ensure quality control.  Nationwide electronic ordering and invoicing would be facilitated using the Super Prime Vendor’s e-commerce platform.  Coalition members report no comparable commercial model that delivers the extensive scope of management services and med/surg contemplated by 2.0. 

Although our members support improving the Prime Vendor program, the 2.0 initiative has generated significant confusion.  With the needs of more than 9 million veterans in the balance, the Coalition believes that, prior to any decision to shift to a new, commercially untested platform, the VA should undertake a thoroughly vetted and methodical approach, with ongoing evaluations over time, to ensure success.

We also note that the 2.0 vision would give rise to an inherent business conflict, as one company would be responsible for both developing the formulary and delivering the items listed on it.  The Coalition is concerned that this structure risks incentivizing contractor formulary decisions based on vendor financial incentives, rather than on the best interests of patients.  

Similarly, the current proposal stipulates that cost savings will be a significant objective for the 2.0 program.  If this objective translates into low cost, technically acceptable veteran’s healthcare, however, it would be inconsistent with the VA’s mission, the expectations of our veterans, and the interests of the American people. For this reason, Coalition members also believe that the VA must clearly assert that value, not low price, is the objective when acquiring medical equipment and supplies for our nation’s veterans. 

Finally, we are concerned that by focusing on a single vendor approach, the 2.0 proposal fails to adequately leverage the competition necessary to bring innovation to our veterans’ healthcare.  Further, 2.0 places no discernible checks on the Super Prime Vendor; rather, it cedes inherently governmental discretion and authority to a private entity.  From a program perspective, vesting a single contractor with too much authority has negative implications for the government and industry regarding:

  • Market Power
  • The government’s ability to replace a non-performing prime vendor 
  • The ability of the private sector to either contract with VA directly as prime contractors or successfully participate in the prime vendor program

The Coalition believes there is a path to success here, starting with assuring that the Prime Vendor program office is led and managed by clinicians; that inherently government decisions are not outsourced to a Super Prime Vendor; that conflicts of interest are avoided, and that market competition is leveraged appropriately to access innovation for veterans. 

Chairman Roe and Ranking Member Walz, thank you again for the opportunity to address the committee and I look forward to answering questions.