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ABSTRACT. The Department of Veterans Affairs (VA) spent $500 million and the Department of Defense (DOD) spent $240 million for medical and surgical supplies in fiscal year 2001. Since the 1980s, to achieve greater efficiencies through improved acquisition processes and increased sharing of medical resources, VA and DOD signed a memorandum of agreement in 1999 to combine their buying power. VA and DOD saved $170 in 2001 by jointly procuring pharmaceuticals, by agreeing on particular drugs to be purchased, and contracting with the manufacturers for discounts based on their combined larger volume. VA and DOD have not awarded joint national contracts for medical and surgical supplies as envisioned by their memorandum of agreement, and it is unlikely that the two departments will have joint national contracts for supplies anytime soon. However, a few VA and DOD facilities have yielded modest savings through local joint contracting agreements. The lack of progress have made in jointly contracting for medical and surgical supplies has, in part, been the result of their different approaches to standardizing medical and surgical supplies. Other impediments to joint purchasing have been incomplete procurement data and the inability to identify similar high-volume, high-dollar purchases.
U.S. General Accounting Office*
BACKGROUND
VA operates one of the world's largest health care systems, spending about $21 billion a year to provide approximately 3.8 million veterans health care through 163 VA hospitals and over 800 outpatient clinics nationwide. DOD spends about $19 billion on health care for over 5.8 million beneficiaries, including active duty personnel and military retirees and their dependents. Most DOD health care is provided at the more than 500 Army, Navy, and Air Force hospitals and other military treatment facilities worldwide.
VA and DOD have separate systems for procuring and distributing medical and surgical supplies. VA purchases supplies through the Federal Supply Schedule (FSS), which is maintained by VA's National Acquisition Center in Hines, Illinois, and is available to all federal purchasers. VA validates a sample of FSS prices to ensure that they are no more than the prices manufacturers charge their most-favored, nonfederal customers.1 Once FSS prices are established, VA manually analyzes its procurement history to identify like items, such as gauze bandages, for which it could potentially standardize and negotiate blanket purchase agreements...