THE AMERICAN RECOVERY AND REINVESTMENT ACT: SERVING AMERICA S VETERANS

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1 THE AMERICAN RECOVERY AND REINVESTMENT ACT: SERVING AMERICA S VETERANS Summary The American Recovery and Reinvestment Act of 2009 (Recovery Act), signed by President Barack Obama on February 17, 2009, provided America with a $787 billion investment package to boost the failing economy, create jobs, restore economic growth, and strengthen America s middle class. The President required that these funds be expended in a manner that is accountable and transparent to the American public. The Department of Veterans Affairs (VA) received $1.8 billion in Recovery Act funds to improve medical facilities and national cemeteries, provide grants to assist states in acquiring or constructing nursing home facilities and to remodel or modify existing facilities to furnish care to Veterans, hire and train temporary claims processors, make one-time payments of $250 to eligible Veterans, and oversee and audit programs, grants, and other projects funded under the Recovery Act. Within weeks of enactment, VA had identified more than 900 projects across all 50 states that would be funded with Recovery Act funds. These investments were designed to improve VA infrastructure, enhance and revitalize America s national cemeteries, hire claims processors to cut the wait times for Veterans, upgrade technology systems to cut red tape for Veterans, and assist states in acquiring, building or remodeling state nursing homes for Veterans. Individual program and expenditure plans were submitted to the Office of Management and Budget for approval and were subsequently posted on VA s Recovery Act website for public access. This case study highlights the acceleration measures we implemented, the accountability standards we set, the transparency commitments we made, and the socio-economic goals we required of ourselves. These changes represent a major cultural shift on the part of America s second largest federal department. They set the conditions for permanent improvements in the way VA does business in service to Veterans. This case was written by Jacqueline Hillian-Craig, U.S. Department of Veterans Affairs, as part of the Recovery Act Case Program. The case is intended solely as a vehicle for classroom discussion, and is not intended to illustrate either effective or ineffective handling of the situation described. The Electronic Hallway is administered by the University of Washington's Daniel J. Evans School of Public Affairs. This material may not be altered or copied without written permission from The Electronic Hallway. For permission, hallhelp@u.washington.edu, or phone (206) Electronic Hallway members are granted copy permission for educational purposes per Member s Agreement (hallway.evans.washington.edu). Copyright 2011 Electronic Hallway

2 New Acceleration Measures VA s success in awarding all of its Recovery Act funds in advance of the September 30, 2010 deadline was a direct result of setting clear goals within a very tight deadline. Implementation of the Recovery Act was intensely managed by the Chief of Staff through weekly meetings that included all executive stakeholders. Although obligation of all Recovery Act funds was not required to be completed before September 30, 2010, the Chief of Staff challenged VA staff to obligate all funds by July 31. VA staff rose to this challenge and successfully obligated 100 percent of VA s Recovery Act funds by July 2010, becoming one of the first federal agencies to achieve this milestone. The intense focus by an enterprise-wide group permitted rapid decision making to eliminate stumbling blocks in VA s systems, created a vehicle for consistent rapid communication for effecting any changes needed, and secured the support of high-level management to maintain an accelerated pace; these were all key elements to success in meeting goals. In order to improve the flow of Recovery Act funds into the economy, VA also took steps to accelerate the processing of invoices for the hundreds of construction contracts awarded. With construction contracts, award recipients submit an invoice for payment only after they perform the work. This leads to lengthy periods between the contract being awarded and the funds entering the economy. To address this challenge, the VA Chief of Staff issued a letter to all Recovery Act construction award recipients urging prompt submission of invoices. At the same time, VA accelerated payment of invoices to small businesses by cutting the standard processing time of 30 days or less to within seven days. VA also cut processing for non-small business invoices from 30 days or less to 10 days. The VA Recovery Act team also pre-validated the required registration by small business vendors in the Federal Contractor Registration system. VA s Office of Small and Disadvantaged Business Utilization authorized overtime for its employees to accelerate the required steps necessary to resolve any award protests. The VA Chief of Staff (VA COS) received daily reports on the status of Recovery Act funds entering the economy through these measures. The VA Acquisition team worked very closely with the field contract officers and engineers to ensure the development of accurate project requirements. Follow-up weekly conference calls with the field staff enhanced the execution of the process steps from inception through the solicitation stage. The VA Office of Acquisition, Logistics and Construction (OALC) created a reporting tool that monitored by phase the completion status of various process steps. Reports were reviewed and discussed during the conference calls with field staff and the ARRA Implementation Team weekly meetings. Additional reinforcement by the ARRA Implementation Team hierarchy was achieved in weekly communication to their staff of expectations for achievement. Additionally, the VA COS reviewed and monitored the status of contract development and solicitations via the OALC reports and made recommendations for goal setting. 2

3 Part of VA s 100% obligations rate was made possible as a direct result of the expeditious action that the Veterans Benefits Administration (VBA) completed in June VBA was given Congressional authority and $700 million to issue one-time $250 payments to eligible Veterans and beneficiaries. VBA sent over 1.8 million payments to Veterans in under four months without hiring a single additional fulltime employee. This effort was considered complex as $250 one-time payments were also authorized to be paid to eligible beneficiaries in receipt of Social Security and Railroad Retirement Board benefits. Although Social Security, Railroad Retirement Board, and VA recipients could be eligible to receive a $250 payment from one or more of the three organizations, only one $250 payment was authorized. Accordingly, VA, the Social Security Administration, and the Railroad Retirement Board had to complete extensive matching between beneficiary listings resident within each organization s systems to avoid duplicate payments. Through direct work between staff of all three organizations, and with the Department of the Treasury, over 1.8 million payments totaling $465 million were provided to Veterans and beneficiaries in June 2009 a short four months after the payments had first been authorized. The remaining balance of funding provided for the one-time Veteran payments, totaling $235 million, was not needed and was returned to the U.S. Treasury. This accomplishment, completed in record time, spurred all VA Recovery Act programs to follow VBA s lead and accomplish the nearly impossible in less time. VA has also obligated an additional $150 million for the state extended care grant program. This program gives states the ability to renovate and build state-run nursing homes for Veterans. This program typically produces grants annually, and the Recovery Act dollars increased the grant pipeline by approximately 300%. Whereas one fulltime employee was hired at the onset of the Recovery Act, the two individuals assigned to this mission were new to VA and its grant process. Director of State Home Construction Tom Graves explained that grants have an approximately one-year obligation lead time. To obligate $150 million in 16 months with additional layers of transparency and reporting required a combination of process streamlining for the VA State Veterans Home grants program and special focus on the execution steps to achieve this outcome. The dedication of specific staff to spearhead efforts and manage the execution of all process steps enabled a tighter control over the entire process from application to approval. VA staff worked closely with their state applicants from the onset of the application process until a grant was signed to ensure prompt and accurate processing. New Accountability Standards Immediately after the Recovery Act had been signed, VA officials obtained unique Treasury Account Fund Symbols for each of VA s Recovery Act programs from the Department of the Treasury. This allowed each program s obligations and outlays to be tracked individually within VA s corporate accounting system and reported on the 3

4 weekly Financial and Activity Reports (FARs), along with major weekly accomplishments. VA awarded 98% of its Recovery Act contracts through a competitive bid process. Federal contracting rules mandate the use of competitive contracting procedures best suited to efficiently fulfill the contract requirements. The urgency and visibility associated with Recovery Act implementation required that managers have access to timely, accurate contract management information. A review of existing contract management information reporting capabilities revealed a need to quickly enhance certain system capabilities in the VA s enterprise contract management system, commonly known as VA s electronic contract management system (ecms). Some system enhancements were implemented immediately, while other more complex enhancements were synchronized for release with programmed system upgrades. One of the rapid improvements in system reporting capabilities was achieved by deployment of a business intelligence tool to leverage existing data sources. Use of ecms for all Recovery Act contracts ensured that all project requirements and contract management activities were clearly visible across the enterprise. Enterprise visibility allowed managers to identify potential problems early and apply appropriate management mitigation strategies. Competitive acquisition plans were developed using key milestones to track the progress of each procurement action throughout the contracting lifecycle. ARRA Implementation Team weekly reviews of ecms status reports focused on the achievement of these milestones. This process provided managers with near real-time visibility into the contracting pipeline. Additionally, this visibility allowed top management to focus first on the development of actionable procurement requirements and subsequently on the contracting activities to solicit and evaluate bids and proposals and award contracts to satisfy the requirements. New Transparency Commitments VA created a VA Recovery Act website to provide the public access to the FARs as well as subsequent information about VA s Recovery Act implementation plans and related efforts. VA program officials also took quick action to prepare detailed expenditure plans that identified each planned Recovery Act project and a specific, estimated budget amount for each. As requested by the Secretary of Veterans Affairs, projects were to be selected based on their ability to make VA medical centers safer, more efficient, greener, and better suited to provide Veterans with the comprehensive brand of care they deserve. With the reporting requirements and structure surrounding the Recovery Act, leadership also used the opportunity to enforce use of VA s electronic contracting management system (ecms) to track all Recovery Act contract awards. This system had been in use since 2006 and the Recovery Act was the catalyst to help reach its fullest potential. ecms can be used to track the complete contracting process with an electronic record of all files pertaining to a contract. The implementation of ecms allowed for real-time data extraction about a project or contract. 4

5 The full use of ecms allowed users to address and correct glitches sooner and allowed full tracking and reporting on the status of all Recovery Act contract actions at the weekly Recovery Act meetings by phase (completion of requirements, solicitations, awards) and by the geographic location of the award. Course corrections could then more easily be made based on actual data on overall progress of Recovery Act actions. The reporting requirements within VA helped to keep the geographical business networks. The Veterans Health Administration distinguishes 21 veterans integrated service networks and the National Cemetery Administration (NCA) distinguishes five memorial integrated service networks. An interesting phenomenon occurred when executive management made everyone s progress public. The network directors began to compete with each other, thereby increasing contract efficiency. New Socio-economic Goals Two of VA s standing goals, predating the Recovery Act, are to award at least 10% of all procurement dollars to Service-disabled Veteran-owned small businesses (SDVOSBs) and 12% of all procurement dollars to Veteran-owned small businesses (VOSBs). To help accomplish these goals, public law and regulation allow VA to target certain demographics for contract awards. 1 Similar to VA s non-recovery Act projects, VA s Recovery Act projects were also suitable for awarding projects to upgrade and make improvements at VA medical centers and national cemeteries. VA contracting officials involved in the award of Recovery Act contracts had a unique opportunity to use competitive bidding and a focus on expanding the number of contracts awarded to SDVOSBs and VOSBs. A total of 76% of these ARRA-awarded dollars went to SDVOSBs and VOSBs. VA s Recovery Act also proved to be a unique opportunity to involve VOSBs and SDVOSBs in VA s procurement program. The relatively narrow scope of VA s Recovery Act projects (facility maintenance, equipment upgrades, etc.) aligned well with VOSB/SDVOSB capabilities. As such, VA was successful in awarding approximately 76% of the Department s Recovery Act contract dollars to these business categories on a competitive basis. In general, the construction industry provides VA with a great deal of opportunity to work with small businesses, and particularly Veteran-owned small businesses. Because the Recovery Act funding that VA received was put towards the various improvements needed in VA medical centers, the agency was able to capitalize on those specific companies for these projects. VA also took advantage of the set-aside programs available to the agency for using Veteran-owned and service-disabled Veteran-owned small 1 Public Law , Veterans Benefits, Health Care, and Information Technology Act of 2006 and Federal Acquisition Regulation part 19.14, Service-Disabled Veteran-owned Small Business Procurement Program. 5

6 business. This focus allowed VA to continue its mission of supporting our Veteran community both inside and outside of its medical centers. Results The result was that by July 2010, contracting officials completed a total of 1,521 contract award actions to 696 contractors. These project awards involved more than 1,200 sites in all 50 states, the District of Columbia, and Puerto Rico, and created more than 2,100 jobs. Of these contracts, 98% were competitively bid and over 76 percent were awarded to service-disabled Veteran-owned small businesses and Veteran-owned small businesses. Because of the availability of timely and accurate information, VA quickly determined that its overall Recovery Act acquisition strategy, focused on competitive procedures and fixed-price performance arrangements, would yield savings that could be applied to additional projects beyond those identified in the VA s original spend plan. As such, VA embarked upon an oversubscription strategy and identified dozens of additional opportunities (projects) for investing Recovery Act funds in programs intended to improve the VA infrastructure and support our nation s Veterans and their families. Eventually, VA s bid savings amounted to roughly 10% of the original spend plan. These cost savings were rolled back into the program to fund additional projects totaling approximately $100 million. VA work under the Recovery Act is enhancing health care services to Veterans by improving VA facilities across the country. Some of the non-recurring maintenance (NRM) projects that were made possible through the Recovery Act include building renovations; road and walkway repairs; replacement of old equipment; security improvements; new construction to expand or improve inpatient wards, exam rooms, and patient areas; replacement of old steam lines and boiler plants; upgrades in emergency power distribution and purchases of additional emergency generators; and improvements to pharmacies. More than 26,000 parking spaces, 39 upgraded or newly built elevator banks, 14,000 inpatient bed spaces, and 16 pharmacy renovations are being undertaken as well as 14,400 clinical improvement projects. Over $200 million in Recovery Act funds are being used to implement renewable energy generation technologies and metering systems, and to improve energy conservation. These investments and awards for renewable energy systems represent more than nine megawatts of planned power generating capacity from solar, wind, and cogeneration technologies. Metering systems installed at all VA-owned facilities will monitor energy utilities, including electricity, water, and chilled water, steam, and natural gas consumption. Over $197 million in energy and water infrastructure improvements at VA facilities will provide for upgrades that will reduce energy consumption and water use, and provide for better monitoring of energy costs. With the $50 million in Recovery Act funds identified for national cemetery improvements, more than 391 contracts have been awarded to restore and preserve historic monuments and memorials; become more energy efficient by investments in 6

7 renewable energy sources such as solar and wind; improve access and visitor safety with 49 road, paving, and grounds improvement projects; raise, realign, and clean approximately 200,000 headstones and markers; repair sunken graves; and renovate turf at 22 VA national cemeteries. NCAs awards also followed a competitive bid process, and the old model, where the majority of contracts were awarded as sole source, was discontinued. Realizing the benefits of the competitive bid process, NCA has implemented this business model for future NRM contracts. By awarding these contracts and obligating these funds quickly, VA not only revitalized its infrastructure but also moved needed money into the economy. This was a major accomplishment for VA, but other milestones were also key in VA s success in obligating its $1.8 billion two months ahead of schedule. The Veterans Benefits Administration has also successfully obligated $150 million provided in Recovery Act funds to hire, train, and equip approximately 2,700 temporary and permanent claim processors. These individuals are helping improve the systems for processing claims to speed the delivery of benefits to Veterans and to make processing claims more efficient. Conclusion VA, as the government s second largest cabinet department, operates complex businesses within its three distinct administrations. The Veterans Health Administration services the medical needs of America s Veterans with a network of more than 1,100 hospitals and clinics across America. The Veterans Benefits Administration operates 58 regional offices throughout the country and provides benefits and services to Veterans. The National Cemetery Administration memorializes fallen heroes by maintaining 131 cemeteries and more than nine million gravesites around the world. VA s more than 335,000 employees administer and carry out its mission to care for him who shall have borne the battle and for his widow and his orphan. The Recovery Act instituted a different way of doing business for all government agencies including VA. The level of transparency and accountability for money spent from both an agency and Recovery Act recipient perspective is noteworthy. Executing the Recovery Act with accelerated timelines, with no breathing room for errors and under intense time pressures, was a perfect exercise for VA to evaluate and improve its internal business procedures. Throughout the first eighteen months of VA s Recovery program, VA leaders have been directly engaged in ensuring success of the Recovery Act, crossagency collaboration has ensued, and VA completed its Recovery Act goals with the highest level of transparency and accountability. More importantly, Veterans across the nation are benefiting from these Recovery Act funds, said Secretary of Veterans Affairs Eric K. Shinseki. Recovery Act projects are improving medical care, speeding claims processing, enhancing our national cemeteries, advancing our energy efficiency, and generating jobs for Americans. When asked to provide a summary on his perception of VA s execution of the Recovery Act, the VA Chief of Staff said: 7

8 The value of the ARRA program for VA has been about the cultural shift that occurred in the agency. It is about people working in a more collegial manner to focus on achieving a common outcome. The ARRA program at VA has created a monumental cultural shift in the way business is being done. Changes in how we do business to meet the requirements of ARRA allowed VA to break down internal organizational barriers creating a cross-cutting team approach empowered to perform oversight and management decision making to accomplish program goals consistent with the VA ARRA program plans. VA awarded more than 1,500 contract awards in less than twelve months; improved the financial processing systems to reduce invoice processing time for certification of an invoice to pay for work completed from the usual 30 days down to seven days; and implemented significant enhancements to the electronic contract award documentation system that provided more consistent and accurate award data to contract officers in the field. These improvements gave the ARRA team access to more expansive information that assisted in tracking and accounting for NRM projects down to the penny. The changes made as a result of the ARRA program are spilling over into other processes and teams within the agency. The accomplishment impetus that we have seen here at VA as a result of the ARRA implementation requirements is having a positive impact on how we deliver the best possible services to Veterans. John R. Gingrich, VA Chief of Staff 8