Department of Veterans Affairs

Recommendations and Actions

DVA02: Modernize Benefits Claims Processing


The Veterans Benefits Administration (VBA) processes more than 280,000 transactions daily using computer and telecommunications systems that have exceeded their useful life cycles.(1) The systems include hardware and proprietary communication protocols acquired during the 1970s and software elements designed as early as the 1960s. Due to the age and uniqueness of the systems, expertise available to maintain system components is increasingly scarce. VBA has obtained parts from systems that were abandoned by other government agencies and private corporations.(2)

VBA's mission is to administer the Department of Veterans Affairs' (VA) nonmedical programs that provide financial and other forms of assistance to veterans, their dependents, and survivors in an effective, efficient, and compassionate manner. Including the 27 million veterans, more than 70 million Americans, or 28 percent of the U.S. population, are potentially eligible to participate in VBA benefit programs.(3)

VBA delivers benefits and services within six basic programs: compensation and pension, education, insurance, vocational rehabilitation, home loan guaranty, and burial. In fiscal year 1992, the VBA dispensed more than $18 billion in benefits, including about $16 billion to 3.5 million compensation and pension recipients. VBA also provided education and training benefits to more than 450,000 recipients, burial benefits to 1 million recipients, and guaranteed or insured more than 237,000 new home loans (VBA currently guarantees or insures a total of about 4.2 million home loans). VBA administers eight life insurance programs, with a total face value of $340 billion, providing coverage to more than 7 million veterans and uniformed service personnel. VBA's insurance program is the seventh largest in the world.(4)

The 58 VBA regional offices are connected to three centralized information centers located in Illinois, Pennsylvania, and Texas. The Illinois center processes compensation, pension, and education claims data from the regional offices. Payment data are then forwarded to the Department of the Treasury, which issues the benefit payments. These payments comprise 96 percent of the total benefits disbursed by VBA. The other centers support the remaining benefit and administrative programs.(5)

Application programs are organized by benefit rather than recipient. The benefit application programs are not integrated, with the result that they duplicate the acquisition and processing of data. Additionally, the system cannot be linked to office automation systems, including word processing, electronic mail, on-line manuals, and technical support.

VBA has developed a comprehensive modernization plan to improve the speed and accuracy of benefits claims processing and reduce operating costs. This plan resulted from extensive analyses of user requirements, numerous technology feasibility studies, and an economic assessment of alternate solutions.

This project was granted Trail Boss status by the General Services Administration (GSA) in 1989.(6) GSA established the Trail Boss program to provide greater assistance to agencies with their selection and acquisition of large-scale computer and telecommunications systems. VA assigned two full-time contracting officers and one attorney (on an as-needed basis) to work directly with the VBA modernization staff.

In its September 1988 publication, "An Evaluation of the Grand Design Approach to Developing Computer Based Application Systems," GSA recommends a modular, evolutionary approach for large acquisitions. Accordingly, the VBA divided its strategic plan into three stages:

1. Stage I focuses on the acquisition of computers and what are known as intelligent work stations (IWSs) for the regional offices. The IWSs will support screen management (windows) and enable users to simultaneously access the claims subsystem, document images, on-line policies and procedures, office automation systems, and workload management applications.

2. During Stage II, VBA will obtain specialized imaging technology, such as scanners and optical disks, to digitize paper images. Use of digitized documents will eliminate many inefficiencies associated with the current paper-intensive environment, including time wasted searching for files and performing repetitive clerical functions. This technology will also make significant workflow restructuring possible, as the current assembly-line process is replaced by a system that permits simultaneous file access by multiple users. VBA planners believe that without this technology, significant reinvention of its work processes is impossible.(7)

3. Stage III will include the acquisition of computers, operating systems, and data base management systems to support centralized applications and data exchange with other VA entities (e.g., medical centers) and other government agencies (e.g., the Departments of Defense and the Treasury, and the Social Security Administration).

More than 100 formal studies of the modernization program have been conducted by the VBA.(8) These studies were closely monitored and supported by the Office of Management and Budget (OMB), GSA, and the Veterans Affairs Committees of both houses of Congress. These studies generally found that implementation of the modernization plan was crucial to VBA's objective of improving service to its customers (i.e., veterans and their families) at reduced costs. The contract for Stage I procurement of hardware, software, and technical support was awarded in December 1992.

The modernization project and the contract award have been issues of concern for Congressman John Conyers, Chairman of the House Committee on Government Operations, and the General Accounting Office (GAO). In a November 1992 report requested by Congressman Conyers, GAO recommended that the program be delayed pending further study.(9) The chairman then requested, by letter to the acting VA secretary in December 1992, that the department postpone the contract award.

Although the contract for Stage I was awarded before the acting secretary received Congressman Conyers' request, implementation is behind schedule. The vendor has reported that VBA modernization staff have been occupied with responses to the many inquiries about the program.(10) VBA officials interviewed during this review assert that the allegations, resulting in GAO investigations described in at least six reports since 1986, have not been substantiated, and valuable time and effort have been wasted in responding to repeated inquiries.(11)

The ranking majority and minority members of both the Senate and House Committees on Veterans Affairs sent a letter dated May 4, 1993, to VA Secretary Jesse Brown, recommending that he implement the modernization plan without further delay. Members of both committees were satisfied that in determining its modernization procurement needs, VBA had met or exceeded all recommended or required measures advanced by the committees, OMB, and GSA.(12)

Secretary Brown recently met with Congressman Conyers, the Comptroller General, and GAO staff involved in reviewing the modernization plan. In a letter to OMB director Leon Panetta on June 24, 1993, the secretary called the VBA modernization project a "VA keystone in the reinventing government arena," and advised that the department would make several management changes to address the concerns of both Congressman Conyers and OMB about the modernization project. The secretary agreed to:

--- elevate departmental oversight of the project,

--- formalize joint OMB and GSA oversight,

--- establish outcome-oriented performance measures to document the system's effect on customer service,

--- update the project's cost analysis in cooperation with OMB, and

--- complete the acquisition for all three stages within the original overall budget projections.

The NPR has determined that the issues of concern associated with the VBA modernization project are being resolved through the personal efforts of Secretary Brown and Chairman Conyers. Their mutual commitment to improving service to veterans, while saving taxpayer dollars, should provide the basis for cooperative accomplishment of both objectives.


1. The Secretary of Veterans Affairs should continue to ensure that the VBA modernization plan is implemented on schedule and within budget.

2. The Secretary should expeditiously resolve issues of concern raised by other executive agencies and congressional oversight committees.


The modernization plan will result in improved quality of service to veterans and cost savings to the taxpayer. The intelligent work stations will significantly increase the speed and accuracy of the claims process. Imaging technology will reduce expenses required to locate, process, forward, and store paper. The use of expert systems will also increase accuracy and reduce over-payment.

These systems will also provide management with the tools needed to effectively and efficiently measure workflow and output. Additionally, the need to assign personnel to large central offices will be eliminated. VBA personnel, electronically tethered to the central system, can be located in closer proximity to their customers and easily relocated as necessary.

Fiscal Impact

The above recommendations are budget neutral, and OMB and VA have agreed to the planning estimates for VBA's modernization plan.


1. Interview with Ronald E. Crellin, Director, Information Management and Technology Assessment Service, Office of Information Technology, Veterans Benefits Administration (VBA), Department Of Veterans Affairs.

2. Interview with Rhoda Mancher, Assistant Chief Benefits Director for Information Resources Management, VBA.

3. U.S. Department of Veterans Affairs, VBA Modernization Management Plan (Washington, D.C., April 1991).

4. Ibid.

5. Interview with J. Gary Hickman, Director, Compensation and Pension Service, VBA.

6. Interview with Ronald E. Crellin.

7. Interview with William D. Stinger, Assistant Chief Benefits Director for Planning, VBA.

8. Interview with Ronald E. Crellin.

9. U.S. General Accounting Office (GAO), Veterans Benefits: Acquisition of Information Resources for Modernization Is Premature, GAO/IMTEC-93-6 (Washington, D.C.: U.S. General Accounting Office [GAO], November 1992).

10. "VBA Modernization Stall Threatens Program," Federal Computer Week (June 21, 1993).

11. U.S. General Accounting Office, Veterans Affairs IRM: Stronger Role Needed For Chief Information Resources Officer, GAO/IMTEC-91- 51BR (Washington, D.C.: GAO, July 24, 1991). Also see other GAO reports: Veterans Benefits: VA Acts to Improve Quality Control System, GAO/IMTEC-90-161BR (September 24, 1990); Management of VA: Implementing Strategic Management Process Would Improve Service to Veterans, GAO-HRD-90-109 (August 31, 1990); Veterans' Compensation: Medical Reports Accurate for Initial Disability Rating but Need to be More Timely, GAO/HRD-90-115 (May 30, 1990); ADP Systems: Department of Veterans Affairs' Benefits Modernization Program, GAO/IMTEC (October 30, 1987); and Computer Systems: VA's Target Project Never Achieved Redesign of Its Processing Software, GAO/IMTEC-86-30BR (August 21, 1986).

12. Interview with Mack Fleming, Staff Director and Chief Counsel, House Committee on Veterans Affairs.

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