VA Cancels Future Deployments of New Supply Chain Management System

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The agency’s decision to transition away from using the Defense Department’s supply chain logistics solution comes after lawmakers and the VA’s Office of Inspector General questioned the system’s value.

The Veterans Affairs Department announced on Tuesday that it will not deploy a multibillion-dollar supply chain management system across the department’s health and medical services, following pushback from an agency watchdog and Congress over the supply chain solution’s effectiveness and cost. VA’s move away from using the Defense Department’s supply chain management system—the Defense Medical Logistics Standard Support, or DMLSS—comes after department officials previously said they were reassessing the rollout of the major IT modernization project. 

“VA’s supply chain efforts are built around one goal: providing a cost-effective supply chain that ensures the delivery of world-class healthcare and benefits to veterans and their families,” VA Chief Acquisition Officer Michael Parrish said in a statement. “As the largest integrated healthcare system in the country, our supply chain logistics solution must meet the needs of the 1,298 medical facilities in our network and the millions of veterans that we serve—and this transition will help us do exactly that.”

On a call with reporters on Tuesday, a VA official said that the department plans to award a new supply chain logistics solutions contract by mid-2023. VA posted an updated presolicitation notice for the new supply chain management system on on Nov. 28. VA’s supply chain modernization efforts are designed to streamline the department’s 58 different legacy systems into one, centralized supply chain logistics solution. The department has been exploring using DMLSS since 2018, when former VA Secretary Robert Wilkie signed a decision memo that selected the Captain James A. Lovell Federal Health Care Center in North Chicago, Illinois as a pilot site for Defense’s supply chain management system.

In March 2019, the VA Secretary issued another decision memo that directed the department’s Veterans Health Administration to implement DMLSS across its network. A cost estimate placed the implementation of the new supply chain management system at $2.2 billion over 15 years.

The DMLSS pilot at Lovell, however, was hampered by functionality problems and a lack of adherence to VA’s own acquisition framework requirements, leading to concerns about the system’s broader implementation. A November 2021 report from the VA’s Office of the Inspector General criticized the system’s deployment at the rollout site, noting that it “did not meet nearly half of all high-priority needs” at the center.

The top Democrats and Republicans on the House and Senate Veterans’ Affairs Committees also sent a joint letter to VA Secretary Denis McDonough in January asking him, in part, to halt the DMLSS rollout because of the system’s high cost in comparison to similar supply chain management solutions. Lawmakers on the House Veterans’ Affairs Committee also reiterated concerns about VA’s DMLSS deployment during a September hearing, citing the system’s troubled rollout at the Lovell pilot site as an example of VA’s lack of consistent oversight of several multi-billion dollar modernization projects.

While VA said it will “cancel future DMLSS deployments,” the department will also continue to work with the Defense Health Agency to maintain funding for the system currently in place at the Lovell pilot site. VA said it also plans to establish an Office of Enterprise Supply Chain Modernization “over the coming months” to oversee the department’s supply chain logistics efforts moving forward.