Contract Renegotiation at the VA

by Barbara Kinosky, Managing Partner

  • Government Contracting

I have been representing government contractors for over thirty years in all kinds of issues and disputes. I have never been involved in the renegotiated of a federal contract, however. That is exactly what the Department of Veterans Affairs (VA) is doing with Oracle Cerner. Oracle Cerner is the latest contractor attempting to modernize the VA’s electronic health records (EHR). As long as I have been practicing, I recall many contracts awarded over the years for just this work. Oracle Cerner is the latest contractor who has failed to deliver. Enter Congress.

Rep. Matt Rosendale, R-Mont., in February, introduced a bill to stop the rollout of the Oracle Cerner EHR system as soon as possible. The VA EHR termination bill states that since 2018, the VA has spent $5 billion on the Oracle Cerner EHR at a handful of its 171 medical centers. Rosendale called the system significantly flawed.

The VA clearly saw the handwriting on the legislative wall. In April it stopped upcoming deployments at VA centers after significant issues were discovered at the original five healthcare centers that Oracle completed. The VA said it would resume EHR deployment activities once the system has met several criteria, including improvements in the experience of veterans and clinicians.

The VA did not just review the issues, it renegotiated the entire Oracle Cerner contract. Under the renegotiated contract, the five-year period has been changed to five one-year terms. The VA in an announcement said it would reassess progress each year and renegotiate (again) if the need arises.

The VA would receive larger monetary credits if the company fails to meet expectations under the revised contract, which comes with 28 performance metrics and one of those is outage-free time. Congress in rare bipartisan agreement agreed with the VA’s tactics.

Cerner, which Oracle acquired in June 2022 was awarded the $10 billion contract in 2018 to help VA replace its Veterans Health Information Systems and Technology Architecture, also known as VistA, with a modernized EHR system.