Gary J. Krump

Deputy Assistant Secretary for Acquisition and Materiel Management

1999 National Logistics Management Training Symposium

June 8, 1999


The Best Way to Predict the Future is to Create It”

--Peter F. Drucker


       Two years ago, the theme of my presentation was "The Logic of Logistics---Balancing Cooperation and Independence."  Last year, my theme was, "Integrating VA"s Business System,” and while we have made strides in both those areas, there is still much to be done.  I am confident, with the impending completion of the VHA Logistics Office and with the Under Secretary’s clear endorsement of “standardization” in the pending VHA Directive; the pending changes in VBA log support and the evolution in NCA logistics, that we will be achieving the requisite balance and integration.  But perhaps of more immediate import in contributing towards, for example, VA’s and especially VHA’s FY 2000 budget needs, is to aggressively take advantage of the size of VA and VA"s acquisition dollars to fully leverage our position in the market.  I think that principle will be repeated in many of the presentations this week---from Tony Principe’s address on the Transition Commission recommendations, to George Patterson and John Ogden’s discussion regarding how they collectively worked to unify and leverage VA’s pharmaceutical requirements.

       As all of us in the Federal logistics field know, it is not enough to be the “Big Gorilla.”  We answer to the Presidential administration and its priorities, to Congress and its priorities, to the taxpayer, and ultimately to our primary constituent, the veteran.  We need to consolidate our strength, using it wisely and judiciously.  As Drucker points out, we can best predict and, therefore, optimize, the future by doing what is necessary to create it to be the way we want it.


“Power has only One Duty to Secure the Social Welfare of the People”

--Benjamin Disraeli


       As VA logisticians, the “social welfare” that must always be our foremost concern is providing increased benefits to our veteran constituents.  Other objectives, as important as they might be, must be subordinate to this tenet.  As we coalesce our power through standardization, national contracting, and other committed volume procurements, we must ensure that so doing will optimize VA’s ability to provide benefits to veterans.

       I would like to spend a few minutes describing how I believe the VA’s logistics system will evolve in the next millennium.  These are not really predictions, but, instead, are projections on how I think we should “create” our logistics system as we leave the 20th century.


       First, I would like to spend some time discussing “standardization.”  Not a new concept; in fact, it is a method by which we have already saved millions of dollars.  However, we do need to build on those successes, and build quickly.


       Second, I would like to touch very lightly on further leveraging our market power by partnering with OGA’s.


       Third, JIT, also not a new concept, will take on even greater significance.


       Fourth, I want to discuss national contracting initiatives, both those ongoing and those to be considered in the future.  I believe we are not taking full advantage of the savings and efficiencies that can be derived from national contracting and national contracting concepts.


       Fifth, we need to have a fully integrated and interactive IT system that facilitates contracting actions, procurement history, and ease of ordering.


       Sixth, I’d like to touch on the means by which we can optimize revenue generation and cost avoidance through integrating the parts of our logistics system---meaning, cooperation between the national/OA&MM level and contracting/materiel management levels within each administration.


       Seventh, we need to continue to aggressively use the Supply Fund for the benefit of VA.  While we have been incredibly creative to date, we need to continue to find even more beneficial uses for this very flexible asset.


       Eighth, we must find the appropriate inventory levels and take advantage of new materiel management techniques to support them.  We need to reduce our inventory investment right up to the point that we find the “extra juice is no longer worth the extra squeeze.”  (Marginal Utility).


       And finally, we need to recognize that the progress we make in these areas will result in reduced staffing needs.  We must begin to take steps to ameliorate the impact of such reductions.  If we fail to plan for these eventualities, we might as well plan to fail.

       Now, in detail, let’s look at each of these points.  While the main examples cited are VHA, the principles in those examples are applicable VA-wide.


VA Standardization in the 21st Century


Standardization/Compliance.  We need to act more like an integrated healthcare and IT acquisition system.  Unless there is an overriding clinical or business reason, all our medical and IT commodities should be standardized throughout the VA system.  Much like our proven success with pharmaceuticals, we must aggressively seek to standardize medicine/surgery equipment and IT items.  I believe that in VHA, the VHA Logistics Office will be in the best position to monitor standardization compliance, and should be empowered to do so.


User Groups Are The Key.  They have been identified in e.g., VHA for many med/surg and dental commodity areas, but they need that nudge, that catalyst, and that can only come from VHA management.  My office will continue to provide procurement history data and administrative, technical, and contracting support to these groups, but, the decision to standardize is necessarily a clinical/VHA decision----and VHA management has to set clear and aggressive goals for the user groups.  Correspondent groups need to be established for VBA and NCA.


Committed Volume Contracting.  Our creative use to date of the FSS/BPA process to extract savings through standardization has been very successful---averaging approximately 17% cost savings per standardized item.  But, we can achieve even more advantageous prices with committed volume contracts---either through the BPA process or through separate national contract actions.


Small Business Issues.  Our ability to take full economic advantage of standardized item/leveraged contracting has heretofore been constrained by SBA’s current position on small business issues.  For example, we have been stopped in the past from doing full and open competition for standardized med/surg items because there were two small business firms that could, arguably, “have met our needs.”  I submit to you, however, that restricting competition to two firms that, up until that time, had met less than three percent of VA’s market needs is not good business practice, is certainly not in VA’s best economic interest, and will never fly with our customers, irrespective of small business legislation.

       We hope to elicit the support of Scott Denniston in gaining a more reasoned approach with SBA to use aggressive subcontracting plans to ensure that small business entities are provided business opportunities resulting from these standardization contracting efforts.  In this way, we can proceed with the most effective standardization contracts while continuing to support the small businesses of our nation.  This may be quite a battle, but one that I believe is worth waging.  Absent victory in that battle, we will of necessity continue using the BPA technique.  We all support and believe the socio-economic programs are important.  However, socio-economic goals should never be achieved at the expense of our veterans.


Just-In-Time Delivery in the 21st Century


       One of the most fundamental changes in VA’s logistics system has been the reliance on JIT commercial delivery systems.  These systems, e.g., prime vendors, allowed us to transition from our Depots with attendant significant one-time and ongoing savings.  JIT"s impact locally has been significant as well, allowing for more efficient ordering and internal delivery, and more effective payment systems.

       Prime vendor systems are also becoming increasingly effective at ensuring standardization compliance and are providing very useful management reports.  We will expand our use of prime vendors, which will expand the menu of options and features available to choose from.  My office and the Office of Finance are exploring optimum payment processing options for PVs and other national contracting initiatives, to ensure we take full advantage of what JIT systems have to offer at the best possible value.


Partnering with OGAs/DoD in the 21st Century


       As some of you may be aware, VA is in the process of concluding an MOA with the Department of Defense to combine the strengths and buying power of VA with those of the DoD to achieve lower medical materiel and services costs for our respective departments and to eliminate redundancies in contracting.  The national MOA is in addition to the MOU’s that the Office of Acquisition and Materiel Management has signed with the Departments of the Air Force and the Army, to explore areas where we can share resources, partner in cost saving logistics efforts, and avoid unnecessary duplication of services.  Working in conjunction with VHA’s VISN Logistic Representatives, my office is sponsoring Regional Summits with VA, DoD, and OGA activities to explore opportunities for sharing resources and partnering at the regional and local level.  We believe all of these interrelated efforts will help us contain costs and in some cases generate additional revenues for VHA activities as we enter the 21st century.

       We are fortunate to have Tony Principi here this week to address the Transition Commission, its recommendations, and what it means to us.  Suffice it to say that an underlying precept throughout that Commission’s report is that we should eliminate redundancies between agencies, share resources, and optimize our combined purchasing power.

       For example, one way to accomplish this is that we have entered into a partnership agreement with the United States Army Medical Command focusing on joint procurement, readiness support, and OA&MM repair services.  Five major Army Medical Treatment Facilities have already established agreements with the Denver Distribution Center and are receiving substantial savings by procuring hearing aids, hearing aid accessories and batteries for active duty soldiers, against DDC contracts.  We also reached an agreement with our Army partners authorizing Walter Reed Army Medical Center to utilize the endoscope and other repair services of our Hines Service and Distribution Center facility, thus allowing Walter Reed to realize significant savings over previous sources.  Considering our successes with the Army, we look forward to establishing similar partnership agreements with Navy and Air Force.


       It should also be emphasized here that many of you are already putting into practice many of the recommendations in the Transition Commission, and the proposed VA/DoD MOA.  Nothing better exemplifies in my mind how cooperation between Federal agencies can be beneficial than the Alaska Federal Healthcare Partnership.  Cooperation between Air Force and VA established the Joint Venture Medical Treatment Facility at Elmendorf Air Force Base.  And the cooperation between VA, Army, Air Force, Coast Guard, IHS, and the Native Tribal Health Consortium has resulted in decreased costs for the provision of health care to their respective customers, at a reduction in the administrative cost of providing those services.  I am proud to say that OA&MM has participated in both of these cooperative efforts and congratulations to those of you from the “frozen tundra” who put such cooperation into practice.


National Contract Initiatives in the 21st Century


       As I mentioned earlier, 2 years ago the theme of my presentation was the “Logic of Logistics:  Balancing Cooperation and Independence.”  Cooperation, translated to mean collective commitment---a better term, perhaps, than “mandatory use”---when strategically used, results in significant savings.  For example, from 1996 to date, VA has saved over $500 million through mandatory pharmaceutical contracts; SPV contracts will save 10% or $33 million over the life of the program.  To borrow a thought from Everett Dirksen, $30 million here, $500 million there, pretty soon we’re talking about real money!

       What I’ve listed here is meant to be illustrative of where we can reach out to OGA’s and achieve significant savings through collective commitment.  Service and medical hardware contracts, such as Telemedicine and Ambulance Services, are examples of areas in which a carefully leveraged contracting strategy can be expected to result in significant savings.  They will, of course, require coordination with field entities and shared responsibilities and authorities.  But the juice, I’m convinced, will be worth the squeeze.

       Look at software licensing:  the Microsoft License Agreement through PCHS enabled us to obtain their license at significantly reduced prices---$147 per license as opposed to many times that if purchased individually!

       Mandatory IT contracts are somewhat controversial.  However, collective commitment will drive better terms and better prices, and certainly will help in ensuring an interoperable system.


发表于: 2005-11-09 22:21 肖利华 阅读(692) 评论(0) 收藏 好文推荐