VA to Award $4.7 Billion Contract for Disability Appeals Reviews Beginning June 1, Officials Say

The Contract

The Department of Veterans Affairs will award a $4.7 billion contract to shift initial reviews of disability compensation appeals to a private contractor beginning June 1, according to two VA officials familiar with the decision. The contractor, selected after a procurement process that closed April 22, will assume responsibility for reviewing appeals filed by veterans who dispute their disability ratings, eligibility decisions, or effective dates, the officials said.

The award decision has not been publicly announced. VA Secretary Doug Collins is expected to notify the House and Senate Veterans Affairs committees during a closed briefing scheduled for May 4, according to a senior VA official involved in the planning. The department intends to issue a public statement and publish a contract award notice by May 6, the official said.

An internal VA planning memo dated April 29, which was reviewed by The Alamo Post, states that the contract covers a base period of three years with two one-year option periods. The memo estimates the contractor will process approximately 380,000 pending appeals and new appeals filed through fiscal year 2031. The contract includes performance metrics requiring 85 percent of initial reviews to be completed within 125 days, the memo states. Failure to meet those metrics would trigger financial penalties of up to $12 million per quarter, according to the memo.

The two VA officials said the contract represents the largest single privatization of VA claims work since the department expanded the Choice program in 2018. One official said the decision follows a 14-month pilot program that tested contractor reviews at the St. Petersburg regional office beginning in February 2025.

How the New Process Will Work

Under the current system, appeals are reviewed by VA employees at the Veterans Benefits Administration's Appeals Management Office in Washington and at regional offices across the country. The new contract will move most initial reviews to contractor staff working at three VA regional offices in St. Petersburg, Florida, Salt Lake City, Utah, and Winston-Salem, North Carolina, the two VA officials said.

The contractor will hire approximately 2,400 additional claims reviewers by the end of September, according to the April 29 memo. Those reviewers will work alongside roughly 1,100 existing VA appeals staff who will remain in place to handle complex cases, final-authority decisions, and appeals involving classified military records, the memo states. Veterans will continue to file appeals through the existing VA.gov portal and will receive decisions printed on VA letterhead, the officials said.

A veterans service organization representative who was briefed on the plan May 1 said the contract includes provisions for training contractor staff on military occupational specialties, toxic exposure evidence, and service-connected disability law. The representative, who spoke on condition of anonymity because the briefing was designated as pre-decisional, said the VSO raised concerns about whether contractor decisions would be subject to the same quality-review standards as current VA staff decisions.

The representative said contractor reviewers will use the same electronic case-management system, known as VBMS, that VA employees use. Veterans will retain the right to request hearings before the Board of Veterans Appeals and to submit additional evidence during the review process, the representative said.

Reaction and What Comes Next

Three congressional aides briefed on the plan said the House Veterans Affairs Committee and Senate Veterans Affairs Committee have been asked to keep contract details confidential until the May 4 briefing. One aide said committee staff have prepared questions about cost overruns, data security, and the criteria for selecting appeals cases that will remain with federal employees.

A military spouse advocate who was briefed on the planned announcement said the change could affect thousands of families waiting for appeals decisions. "Families have been told for years that VA employees are the only ones qualified to make these determinations," the advocate said. "The shift to a contractor raises questions about consistency and accountability."

The contract award comes as the VA reports a backlog of approximately 160,000 legacy appeals and 220,000 appeals under the Appeals Modernization Act framework. The two VA officials said the department expects the contractor arrangement to reduce the combined backlog by 40 percent within 18 months. The officials said the department also expects annual savings of $340 million after the third year of the contract.

The VA officials said the department plans to send a notification letter to veterans with pending appeals by May 15. The letter will explain that the review process is changing and will include a toll-free number for questions, the officials said.

What to Watch

The VA is expected to publish a contract award notice in the Federal Register by May 6, according to the senior VA official. The notice will include the contractor's identity, the specific contract vehicle, and the names of losing bidders. The Government Accountability Office typically has 10 business days to receive protests after a notice is posted.

Congressional aides said the House Veterans Affairs Committee has scheduled a hearing for May 12 to examine the contract. Senate staff said a separate oversight hearing is likely before Memorial Day. Veterans groups said they plan to request a meeting with VA leadership before the June 1 start date to review the training plan and quality-assurance protocols.

The two VA officials said the department is preparing for a possible legal challenge from veterans groups or federal employee unions. One official said VA lawyers have concluded the contract is permitted under existing authority but expect a court challenge to be filed shortly after the public announcement.