Company supplying eyewear to veterans accused of ‘bait-and-switch’ to undercut competition
A company supplying eyewear to veterans has been accused of lowballing prices to win a contract with the Department of Veterans Affairs (VA), then making up that money on the backs of veterans through higher prices for upgrades and aggressive sales tactics – all at the expense of quality.
Based in Kentucky, and run by U.S. veterans, PDS Consultants won a five-year contract in November 2022 to manufacture eyewear and provide other optician services for VISN 7, replacing competitor Superior Optical the following October.
VISNs, or "Veterans Integrated Services Networks," refer to a nationwide network of clinics and other healthcare facilities for U.S. veterans. VISN 7 covers Georgia, Alabama, and South Carolina.
To win the contract for VISN 7, PDS Consultants bid less than $10 million for the contract – far lower than what Superior Optical and Carter-Lambert bid, at around $30 million and $40 million, respectively.
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Many employees who were working for Superior Optical found themselves working for PDS Consultants overnight, after the company took over VISN 7. Fox News Digital previously reported on PDS employees who felt pressured to upsell veterans and beat monthly sales goals.
In the months following that report, Fox News Digital received a barrage of messages from people close to PDS Consultants and the VA, who alleged that the company was making up the loss on the backs of veterans. Each person requested anonymity for fear of reprisal.
A source close to the VA who spoke to Fox News Digital on the condition of anonymity likened the way PDS Consultants won the contract for VISN 7 to a "bait-and-switch."
"They undercut the competition by bidding as low as $1 on lenses. Any reasonable person knows there is no way you can make an eyeglass lens for under a dollar," the source said. "Well, you got to make that money up in some way – because no business is going to stay in business unless you’re making money, obviously. So, what [PSD] would do is, on the back end, they would upsell their eyeglasses, add-ons [and] upgrades at higher prices to the veterans."
Court filings show PDS Consultants proposed asymmetric or "unbalanced" pricing, where the company offered some products well below market rate and others well above market rate. Some line items were provided for nominal prices or even free, in the case of optician services, for $0 per hour.
But despite the contracting officer determining that PDS’ prices were "significantly understated" for some services and "significantly overstated" for others, these unbalanced prices were not deemed an "unacceptable risk of overpayment by the taxpayer."
Still, the source close to the VA whom Fox News Digital spoke with alleged that eyeglass quality plummeted under PDS’ stewardship, likening it to going from Ray-Bans to Walmart products.
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"The veterans were getting very poorly crafted, poorly made, eyeglass products. Sometimes they would be delivered broken. [Sometimes] they would be delivered with the wrong prescriptions," the source said, adding that delivery times went "through the roof."
"We were getting complaints from veterans, I would say six, seven, eight complaints a day about the poor craftsmanship, the quality, the delivery times. Sometimes it would go for 15 days, which is double the time that they were supposed to send it," the source said.
Other sources told Fox News Digital that veterans' options for free frames and lenses were drastically reduced after PDS Consultants took over VISN 7. One source said the company offered the "worst of the worst" brands for free and charged much higher for upgrades than previous incumbents, which meant veterans were paying more out of pocket.
Fox News Digital reached out to the VA in February to inquire about the allegations against PDS Consultants. VA Press Secretary Terrence Hayes told Fox News Digital at the time that the department "has not received any direct Veteran complaints about the vendor, nor has VA been made aware that any Veterans have been asked to pay higher prices when they fill their prescriptions."
But the source close to the VA contradicted that statement, saying that the VA received more complaints after PDS Consultants won the VISN 7 contract, "than all 10 years of the prior incumbent contractors combined."
Fox News Digital reached out to the VA again this month to inquire about these allegations.
Secretary Hayes told Fox News Digital its VISN 7 clinical team "is aware of Veteran complaints and have made efforts to address those concerns," without elaborating.
"If contractors fail to meet the high standards our Veteran patients deserve, we hold them accountable to the terms of their contracts and when necessary, take steps to terminate the contract," Hayes said. "If there is documented past performance by a contractor, then the government may choose to resolicit for a new contract vendor."
Hayes said the Veterans Health Administration awards "firm, fixed-price contracts," meaning the price "is not subject to any adjustment based on the contractor's cost experience."
In other words, the contractor bears the maximum risk and full responsibility for all costs and resulting profit or loss.
Hayes denied the notion that veterans pay higher out-of-pocket costs "because prescription eyeglasses are provided to veterans at no cost." He acknowledged that veterans may have noticed fewer choices to choose from with a switch in vendor, but denied that the quality had diminished.
"Should a Veteran want a specific brand, or specialty lens that is not medically indicated, the Veteran has the option to pay an upcharge for that selection," Hayes said. "Lastly, when there is an error in manufacturing or if eyeglasses arrive broken, VA pays for the remakes. Veterans are not charged for replacement eyeglasses in those cases."
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PDS Vice President Rob Yopps told Fox News Digital the company stands by its performance and its Veteran owners "are proud of their service to our Nation in combat and honored to continue to serve our Nation's Veterans."
Yopps declined to comment on PDS' specific bidding strategy, saying the company follows "the established process governed by the VA."
He said that the awarding of the VISN 7 contract has yielded "substantial savings for the U.S. taxpayer."
"PDS complies with its contracts as agreed to with the VA. PDS’ performance is addressed through VA's official channels. PDS received positive past performance reviews from VA indicating satisfaction with our performance on the referenced contract," Yopps said.
He referenced the VA's previous comments to Fox News Digital, when it stated it "found no evidence of price increases after PDS won the contract, nor has it received any direct Veteran complaints about the vendor."
In the meantime, Superior Optical has filed a lawsuit in the Court of Federal Claims against the VA, protesting the awarding of the five-year contract to PDS Consultants. Oral arguments for that case are expected to begin in late July.