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Thursday, June 6, 2013

FAS made a Mess of MAS

Improper Management Intervention in Multiple Award Schedule Contracts, Report Number A120161/Q/6/P13003, June 4, 2013, by Office of Audits, Office of Inspector General, U.S. General Services Administration
OBJECTIVE -- The objective of this audit was to review the circumstances related to FAS management intervention in contracting actions related to MAS contracts.

Finding - Improper Federal Acquisition Service (FAS) management intervention in Multiple Award Schedule (MAS) contracts resulted in inflated pricing and/or unfavorable contract terms, and undermined the authority of contracting officers.

Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships. While many Federal laws and regulations place restrictions on the actions of Government personnel, their official conduct must, in addition, be such that they would have no reluctance to make a full public disclosure of their actions. [FAR 3.101-1]

In the course of performing Multiple Award Schedule (MAS) contract audits, the Office of Inspector General (OIG) identified numerous instances where Federal Acquisition Service (FAS) management, based on complaints from contractors, overrode contracting officer determinations without proper justification, pressured contracting officers to extend or award contracts, and reassigned contracts to different contracting officers. In the Oracle contract, the directors did not provide justification for transferring the contract to another contracting officer. In addition, the contracting officer who was replaced stated that the Division Director said, “Oracle is done with you as a CO.” In addition, when the OIG asked why some standard GSA contract language was changed in Deloitte’s contract, the contracting officer stated that Deloitte would not agree to a contract without the revised language.

These instances of FAS management intervention included direct communications between contractors and FAS management, often without the knowledge and participation of the responsible contracting officers.

In at least one case, FAS management interference resulted in a contract with higher prices and less favorable terms than those recommended by the original contracting officers. In other cases, interference resulted in questionable contract extensions.

To more fully assess the extent and possible impact of these cases on the integrity of the MAS contracting process, we reviewed the circumstances related to some of these management intervention actions. This report focuses on three large MAS contracts representing over $900 million in contract sales in calendar year 2011 (CY 2011).

The Federal Acquisition Regulation (FAR) Part 1 includes a “Statement of guiding principles,” as well as the authorities and responsibilities of the contracting officer.
FAR 1.102-4(a) states: "Government members of the [acquisition] Team must be empowered to make acquisition decisions within their areas of responsibility, including selection, negotiation, and administration of contracts consistent with the Guiding Principles. In particular, the contracting officer must have the authority to the maximum extent practicable and consistent with law, to determine the application of rules, regulations, and policies, on a specific contract."

In addition, the following FAR citations outline the authorities and responsibilities of the contracting officer. "No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met. [FAR 1.602-1(b)] Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment."

The concentration of authority in the contracting officer is critical to maintain the integrity of the contracting process. FAR 4.1 requires that, “Only contracting officers shall sign contracts on behalf of the United States.” In addition to the FAR requirement of wide latitude, contracting officers must also complete educational and training requirements before being granted a contracting warrant. The FAR, therefore, vests significant contracting authority and responsibility in the contracting officer and ensures that the contracting process is independent from all impairments.

FAS management intervention undermined the authority and morale of GSA contracting officers. FAS management (1) allowed contractors to circumvent contracting officers when the contractors disagreed with contracting staff determinations, and (2) supported the contractors’ positions, including reassigning contracts to different contracting officers. In each reassignment case, the new contracting officer awarded or extended contracts without properly addressing significant issues identified by previous contracting officers.

Although we have noted instances of improper management interference across several MAS Schedules, the three examples included in this report relate to FAS Schedule 70 Information Technology contracts. We will primarily focus on the actions of the Deputy Director and a Division Director (directors) of the Schedule 70 program.

FAS directors’ interference in the Oracle contract included undocumented discussions with Oracle representatives without the knowledge or participation of contracting staff, directives to the contracting officer to take actions contrary to the contracting officer’s determinations, and reassignment of the contract to another contracting officer. The evidence shows that Oracle officials went over the heads of the contracting staff to FAS management to have contracting staff replaced and to obtain decisions favorable to the company. This intervention usurped the contracting officer’s authority and resulted in the extension of the contract with questionable pricing, terms, and conditions. The Division Director twice intervened by directing the extension of the contract, despite contracting officers’ determinations that extensions were not in the best interests of the United States. The directors’ explanation for extending the contract was that the volume of sales under Oracle’s contract demonstrated a need by federal agencies. However, no examples were provided to demonstrate how government agencies would be negatively impacted if the contract were allowed to expire.

Oracle’s Senior Director of Government Affairs sent an e-mail to the Associate Administrator for GSA’s Office of Governmentwide Policy that stated, “Regarding GSA. We’re having a miserable time with our contracting officer on ge! tting [sic] our schedule contract modified. How would we go about getting a new one?” The GSA official asked Oracle if it was referring to a FAS contracting officer and Oracle responded that it was. Oracle also provided the June 29 letter and stated, “We find it a bit difficult when a CO is telling us which of our job titles do not qualify to be on a schedule. Can fill you in on the rest.”

FAS management intervention in the Carahsoft contract included undocumented discussions with Carahsoft representatives without the knowledge or participation of contracting staff, directives to the contracting officer to take actions contrary to the contracting officer’s determinations, and reassignment of the contract to another contracting officer. This intervention usurped contracting officer authority and resulted in the lengthy extension of a contract with inflated pricing and other terms and conditions unfavorable to the Government. Carahsoft’s MAS Contract Number GS-35F-0131R was scheduled to expire on November 18, 2009, but has been repeatedly extended on a temporary basis and is still currently under temporary extension.

On March 30, 2011, the contracting officer sent an e-mail to the OIG that stated:
The pressure is coming from my boss who has told me he doesn't want Carahsoft to call their Congressman. They have already called their Congressman before, so . . . my Division Director, said if we don't work with them (which means bend the rules that we have in place and make other vendors follow) that they will call the Congressman, and he doesn't want that. I just feel stuck between a rock and a hard place. I don't feel like Carahsoft wants to negotiate . . . they want to dictate. When I try to negotiate, or ask for information, they don't want to provide it, and [the Division Director] has told me they are going to call their Congressman, and it will come right back down to [their] or my lap to fix.
FAS management intervention in the Deloitte contracts included undocumented director discussions with Deloitte representatives without the knowledge or participation of contracting staff, directives to the contracting officer to take actions contrary to the contracting officer’s determinations, and reassignment of the contract to another contracting officer. This intervention usurped contracting officer authority and resulted in the award of a contract with inflated pricing and other terms and conditions unfavorable to the Government.
To me, one of the teachable moments of this report is that when structures are set up to "streamline" procurement, to place efficiency over integrity, issues such as this cannot come to light because there is no competitor in the process who would step in to complain. In this case it is a necessary precondition to having such a mechanism, in my mind, to have an independent and robust review mechanism that the contracting professionals can turn to and trust to "have their back".

While this post is has run on a bit, there is a lot more very interesting and human interaction detailed in the report that makes for valuable insight of what goes on at the coalface of procurement, and I highly recommend a read of it. It's only 15 pages long and you have already read a lot of it here.

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