White House

No competition, no cost estimate as Kansas City firm picked for coveted VA contract

David Shulkin, secretary of U.S. Veteran Affairs, speaks during a White House press briefing in Washington, D.C., U.S., on Wednesday, May 31, 2017. Shulkin said the VA must wait at least a month under current law before it can discipline an employee for misconduct or poor performance.
David Shulkin, secretary of U.S. Veteran Affairs, speaks during a White House press briefing in Washington, D.C., U.S., on Wednesday, May 31, 2017. Shulkin said the VA must wait at least a month under current law before it can discipline an employee for misconduct or poor performance. Bloomberg

The Trump administration picked Kansas City-based Cerner Corp. for a coveted contract to modernize veterans health records, but the news came with a caveat: There will be no competition for the taxpayer-funded project.

And neither Cerner nor the Department of Veterans Affairs could say how much the contract will cost.

The federal government typically awards contracts to private companies after a competitive bidding process in order to keep costs low and avoid conflicts of interest.

“When you have competitive bidding it prevents government officials from throwing contracts to their friends or keeping them from people they don’t like,” said Richard Painter, chairman of the board of Citizens for Responsibility and Ethics in Washington, a nonpartisan watchdog group.

Competitive bidding also protects taxpayers and helps guarantee the highest quality products for the money.

“It’s justified in some circumstances (to forgo bidding) but usually the rules are there for a reason,” he said.

VA Secretary David Shulkin told reporters on Monday he has no ballpark estimate of how much a Cerner contract might cost. He said the administration has not begun negotiations over price.

“We have not agreed upon any pricing, but I can assure you that before we were to sign off on a contract, we are going to make sure that this is the best value for taxpayers,” Shulkin said.

Cerner already has a $4.3 billion contract with the Pentagon to overhaul the Defense Department’s health records system. Shulkin said on Monday that his decision to waive competition and acquire Cerner’s software directly was motivated by President Donald Trump’s desire to act quickly.

“From the outset that when the president selected me to be secretary, he made clear to me that he expected us to act with faster decisions, to act like business, and to really make sure that we are really doing the right thing to change veterans’ health care. And that's exactly what we’re trying to do today,” Shulkin said.

Trump called the move “one of the biggest wins for our veterans in decades” in remarks delivered from the White House’s East Room.

Two years ago, when Cerner won a coveted Pentagon contract to overhaul its medical record system, the highly competitive selection process took longer than two years.

Cerner partnered with defense technology contractor Leidos, Accenture Federal Services and Intermountain Healthcare in its bid for the $4.3 billion, 10-year defense contract. The team beat out Cerner’s major rival, Epic, a Wisconsin-based health IT firm that also is a leading provider of electronic health records technology.

This time, however, Epic and other health IT companies didn’t have a chance.

Federal agencies such as the VA can waive competition by citing urgency or public necessity, said Phillip Carter, a senior fellow at the Center for a New American Security who teaches government contracts law at Georgetown University Law Center.

Cerner’s rivals could try to challenge that reasoning in court, Carter said.

But assuming the VA’s reasoning is legally defensible, he said, “the challenge here is that by giving up competition, the VA has given up all control to the company” when it comes to price.

“At the end of the day they’ve given all the leverage in the world to Cerner and unless the VA is going to walk away from this – and that would be a huge embarrassment for the VA – they’re probably going to pay whatever Cerner asks,” Carter said.

Cerner’s price likely will be close to what they charge the commercial market, plus whatever it takes to customize its software for the VA, he said.

Shulkin told reporters that he wouldn’t be surprised if there is some pushback to the lack of bidding from members of Congress and other stakeholders.

“But I do not expect any major fights on this,” the secretary said.

Democrats on Monday said they’d be monitoring the contracting process closely to ensure veterans don’t experience any disruptions in the quality or accessibility of their health care.

Sen. Jon Tester of Montana, the top Democrat on Senate’s Veterans Affairs Committee, was supportive of Shulkin’s announcement but his spokesman said he has some questions and concerns about timing and costs that the secretary did not answer.

The VA still must draw up a justification for waiving open and public competition, and Tester’s office will be following up with VA for those documents, said his spokesman, Dave Kuntz.

Kuntz also noted there will be a 30 day notice before the awarding of a contract is official.

The new VA health records system won’t be identical to the Defense Department’s, but its core will be Cerner’s Millennium software, Shulkin said on Monday.

He said Cerner’s work on the Pentagon’s system, now known as MHS Genesis, pushed his decision in Cerner’s favor.

Adoption of the same system “will ultimately result in all patient data residing in one common system,” the secretary said.

Shulkin said there was a “public interest exception” to allow awarding the Cerner contract without a “full and open competition.”

Veterans organizations greeted Shulkin’s announcement on Monday with cautious optimism.

“Time and time again, from multiple administrations, (veterans) have seen big promises on this problem that were never fulfilled,” said Paul Rieckhoff, CEO of Iraq and Afghanistan Veterans of America, in a statement.

“But making this announcement is the easy part. The hard part is actually getting it done.”

Wise reported from Washington. Stafford reported from Kansas City.

Lindsay Wise: 202-383-6007, @lindsaywise