Procurement of ADP Equipment and Services by Veterans Administration

Gao ID: 112407 May 29, 1980

GA0 reported on certain contracts and purchase orders related to the Veterans Administration's (VA) procurement of automatic data processing (ADP) equipment and services, using end-of-year funds, specifically VA medical ADP activities. The Office of Management and Budget (OMB) reviewed these contracts and purchase orders and alleged irregularities relating to some of these procurements. They directed VA to refrain from further obligations against these procurements and asked the Government Services Administration (GSA) to report all VA requests for ADP procurements in excess of $10,000. VA issued stop work orders on some of the contracts. OMB transmitted two of the contracts to the Department of Justice, requesting an investigation into questions of budgeting process, favoritism, and possible criminal violations. OMB recommended that VA terminate seven of the contracts, including the two which were referred to Justice, and that it continue with the remaining procurement contracts. VA responded by terminating four of the seven contracts, and subsequently terminating one other. It is continuing work on another with modifications and is working on one under Justice review. GAO is involved in all of these procurements as it is reviewing new starts by VA in the ADP medical program. GAO has not been able to fully document its observations, or discuss these observations with the organizations concerned, VA, OMB, or the Small Business Administration (SBA). GAO has found that, in many cases, VA did not comply with applicable Federal procurement regulations as they relate to negotiated procurements, it did not perform cost or price analyses nor avail itself of the scheduled prices and discounts available through GSA negotiated ordering. Some VA price negotiations were not documented. VA alleged Federal procurement regulations do not apply to the procuring agency when dealing with small business firms under the set-aside program. GAO suggested that the question of the use of the set-aside program was a matter for SBA review. GAO suggested that the VA resolve any open questions between OMB and VA, and review its present activities with an emphasis on compliance with Federal Procurement Regulations. GAO will include in its review of the SBA set-aside program any unresolved questions relating to the SBA involvement in VA procurements.

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