- The Washington Times - Thursday, November 20, 2014

The Department of Veterans Affairs has cut its ties to a politically connected contractor weeks after an investigation found officials for the company, FedBid, plotted to “assassinate” the character of one of the VA’s top acquisition officials in 2012.

The Veterans Health Administration “has ended the contract with FedBid“, VA spokeswoman Genevieve Billia said in a statement to The Washington Times this week, following a series of reports that the VA’s “reverse auction” process — handled by contractor FedBid — was prompting complaints from suppliers and had allowed potentially counterfeit surgical supplies to flow unchecked into VA medical centers.

The VA’s statement came in response to another inquiry by The Times about an FBI memo sent last summer warning the department that a Maryland resident had bypassed FedBid security procedures to create bogus companies that won government contracts and ripped off suppliers.

The memo, obtained through the Freedom of Information Act, doesn’t identify the resident, but details of the case make clear that the FBI was referring to the case of Larayne Whitehead, who was sentenced to 18 months in federal prison in August.

The U.S. attorney’s office in Maryland said in a statement on the case that Whitehead and others used at least 15 companies to win federal contracts. Once the firms convinced subcontractors to provide services to the government, the shell companies shuttered but kept the money, according to court records.

Whitehead and others then created new shell firms, records show. The scam ran from 2007 to 2013, costing the government more than $2 million.

Vienna, Virginia-based FedBid had been the VHA’s contractor in charge of holding reverse auctions, where suppliers bid against themselves to give the government the best price on purchases.

Andres Mancini, a company spokesman, said FedBid cooperated with the FBI and that the companies in the Maryland case were not listed on the government’s list of excluded contractors.

“Both online and offline, the federal government will encounter bad actors,” Mr. Mancini wrote in an email. “Increased visibility can help to mitigate the damage that they cause.”

He said FedBid provides “unmatched visibility,” allowing for buyers to perform due diligence.

He also said the company had established procedures to protect against “unauthorized sellers.”

“We fully supported the FBI and U.S. Attorney’s Office in their investigation and provided them with all necessary information to ensure a successful prosecution,” he wrote.

More legal trouble

FedBid is facing legal trouble of its own. The VA’s Office of Inspector General has recommended the company and several of its top officials be debarred after an investigation found the company and a former top VHA contracting official plotted to discredit another VA official who had placed a moratorium on reverse auctions in 2012.

Investigators said former VHA contracting official Susan Taylor leaked nonpublic information to FedBid and pushed the agency to use the company.

Citing a “groundswell of complaints” from suppliers, VA contracting official Jan Frye placed a moratorium on reverse auctions in 2012, but it was overturned amid lobbying by FedBid and congressional allies.

“Need to assassinate his character and discredit him,” former FedBid President Glenn Richardson wrote in an email to colleagues that was uncovered by the IG’s office.

Rep. Mike Coffman, the Colorado Republican who chairs the House Veterans Affairs’ oversight subcommittee, later sent a letter to VA Secretary Bob McDonald questioning whether FedBid should continue to do business with the department.

At the time, VA officials did not indicate whether they had planned to discontinue using FedBid, but Ms. Billia said in the statement Wednesday that the agency now uses a reverse auction platform created by the General Services Administration.

VHA has ended the contract relationship with FedBid and does not use commercial vendors for reverse-auction services,” Ms. Billia wrote in an email. “VA uses the General Services Administration (GSA) reverse-auction tool that is provided at no additional cost for Federal Supply Schedule (FSS) buys.”

In the wake of the IG’s report, FedBid officials defended the company, whose backers include major Washington-area investors Ted Leonsis and Steve Case. The company’s advisers, employees and directors include two former top White House procurement officials and retired Army Chief of Staff Gen. George Casey Jr.

In a previous statement to The Times on the IG’s report, a FedBid spokesman said the company cooperated fully with the IG’s probe, adding, “We believe FedBid took appropriate actions to protect its ability to lawfully perform the business services it was contracted to provide with VHA.”

The company has also said it helped stimulate competition and provide low prices for the VHA, with $1.25 billion in fiscal 2013 going to small businesses, including $333 million to veteran-owned firms.

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