Democrats Urge Hearings Into VA Contract

Times Staff Writer

Democrats on the House Veterans Affairs Committee called for hearings Wednesday into a multimillion-dollar contract awarded to a firm now headed by former Veterans Affairs Secretary Anthony J. Principi.

Principi is chairman of the board of QTC Management Inc., a Diamond Bar company that administers medical exams under contract for the VA. In a two-page letter to Rep. Stephen E. Buyer (R-Ind.), chairman of the House panel that oversees the VA, seven Democrats asked for investigations into exam costs by the company and into possible conflicts of interest in awarding the contract.

“Our committee should review the facts and circumstances involving Mr. Principi and the QTC contracts to determine if there was any wrongdoing,” the letter said. It sought a hearing date no later than Oct. 6.

Buyer could not be reached for a response Wednesday.


Principi previously told The Times that he fully complied with federal ethics laws, and that as VA secretary for four years he played no role whatsoever in the awarding or administration of the contracts. Under the contracts, QTC conducts exams on veterans applying for disability benefits.

Principi, who was the president of QTC when he was nominated for the top VA job in late 2000, said he divested himself of all interests in the firm before being sworn in as secretary. He also said he had never heard of QTC until mid-1999, when he was recruited for the top job at the company by a headhunting firm. Principi had served as a top VA official under former President George H.W. Bush.

Officials of the American Federation of Government Employees issued a statement criticizing the contract.

“This is a conflict of interest in the most extreme form,” said union President John Gage, adding that the exams could be performed by VA staffers at a far lower cost.

Gage called award of a contract to a firm connected to a political appointee “flat wrong,” and said the case “should definitely raise red flags with members of Congress.”

The Times reported Sunday that data compiled by a consulting firm in 1999 estimated that the cost of the QTC exams was as much as 400% higher than in-house exams. The consultants recommended that the VA do a follow-up study to get more precise cost data on the in-house costs. It was never conducted.

In their letter to Buyer, the seven House Democrats, including ranking member Lane Evans (D-Ill.), said the full committee “should address if the leader of an organization who has essentially divested himself from a prior business interest can, even unintentionally, influence the award of a business contract or provide an advantage to his former firm.”

As Principi has pointed out, he was not at the VA or QTC when the firm first won a contract from the VA in 1998. The firm won a second contract in 2003, while Principi was running the VA. It has been revised by amendments and remains in effect today.

Congressional Budget Office projections show the firm’s VA contract could be worth as much as $1.2 billion in fees if fully funded by Congress through 2008.

VA officials said the agency complied with bidding requirements by publicly advertising for bids 30 days before an October 2002 deadline. QTC was the only firm to submit a proposal. Officials of other firms said they were not aware the contract was up for bid, though they had previously expressed interest to the VA.