Agencies bust myth of year-end buying sprees
September 7, 2010 by cs
Some agency officials say they are following a well thought-out approach to spending what’s left in their fiscal-year information technology budgets — a game plan that defies the myth that departments rush to spend funds before they become unavailable after Sept. 30.
The phenomenon of the year-end spending sprees first came to light in 1980, when the Senate Governmental Affairs Subcommittee on Oversight of Government Management issued a report that found the hurry to obligate expiring funds before the end of the fiscal year often led to a lack of competition, inadequately negotiated contracts and the purchase of low-priority items.
In a 1998 follow-up to that study, the Government Accountability Office concluded agencies’ spending patterns were hard to assess because quarterly budget data, which could show a spike in fourth-quarter spending, was unreliable. Since then, federal auditors haven’t evaluated the issue much, and information on last-minute expenditures can be hard to obtain, according to some academic researchers.
Ramji Balakrishnan, an accounting professor at the University of Iowa who co-wrote a 2007 report on the subject, recently told Federal News Radio that he was able to access figures on year-end spending at U.S. Army hospitals largely because his co-author, a veteran, had contacts inside the military. According to the paper, which was published in the Journal of Management Accounting Research, administrators stockpiled supplies toward the end of a fiscal year, but then saved more money than they spent during the year-end splurge at the start of the next fiscal year.
A trend of precalculated buying seems to be occurring at several agencies with large IT budgets, including the General Services Administration and Veterans Affairs Administration, according to government officials.
In April, Administrator Martha Johnson directed GSA’s chief information officer, Casey Coleman, to complete five high-priority IT projects within 18 months — a feat that Coleman said the agency finished in 10 weeks. The agency’s IT budget for fiscal 2010 is $605.9 million. By quickly wrapping up the projects, which included boosting the capacity of GSA’s networks and adding remote private networks for teleworkers, Coleman was able to focus late-year spending on supplemental purchases for the agency’s increasingly mobile workforce, she said.
“By doing that we really set the foundation for IT modernization for the agency,” Coleman said in an interview with Nextgov. “Now we are in Phase 2 of our modernization program.”
Phase 2 involves purchasing green products. Johnson this summer challenged GSA to eliminate the federal government’s adverse effects on the environment, what’s known as creating “a zero environmental footprint.”
The agency plans to spend its IT money in September on products and services that support the zero e-emissions goal, Coleman said. GSA will invest in videoconferencing equipment; shared printing workstations to replace individual desktop printers, which are rarely used; and a cloud computing tool for e-mail, scheduling and other interoffice communications. Cloud computing is an arrangement that provides online access to hardware and software, eliminating the need to rely on energy-hungry, in-house data centers for IT services.
A contract for cloud services is expected to be awarded in October using fiscal 2010 money earmarked for spending in September.
GSA was unable to provide information on remaining money the agency returned to the treasury at the end of the last fiscal year.
The thinking is that GSA, as the nation’s biggest storefront, can expand the green IT market governmentwide — and perhaps nationwide — by purchasing environmentally responsible goods. Experimenting at the departmental level also might enable GSA to eventually offer governmentwide, eco-friendly IT contracting vehicles, agency officials said.
Veterans Affairs, which has a $3.3 billion IT budget, will spend its remaining fiscal 2011 funds on rolling out systems that can quickly exchange patient records via the Web, VA officials said. Such expenditures should increase access to health care, including mental health services, they added. September money also will support upgrades to benefits delivery systems and the department’s IT infrastructure.
At the end of fiscal 2009, Veterans Affairs let $462,000 in IT-related funding lapse, or become unavailable for new purchases.
In the past, officials at the Environmental Protection Agency spent all of their IT money by the end of the year, but only after careful planning, they said. Last year, EPA did not return any IT-related funding to the treasury. The agency’s enacted IT budget for fiscal 2010 is $465 million.
A significant portion of EPA’s technology infrastructure spending is managed under a business model that quantifies IT needs at the beginning of each fiscal year, officials said. “This process promotes spending that is thought-out and forecasted, and minimizes a potential end-of year spending surge,” EPA spokeswoman Latisha Petteway said.
– By Aliya Sternstein – NextGov.com - 08/26/2010
Agencies are getting too attached to incumbent contractors, watchdog finds
September 3, 2010 by cs
Federal agencies are failing to maximize opportunities to make contracts competitive, often because of poor management or because officials have grown comfortable with incumbent contractors, according to a new report from the Government Accountability Office.
The watchdog reviewed trends in noncompetitive contracts during the past several years and discovered a number of questionable business practices by contracting officials and program managers. GAO found 44 percent of all federal contracts in fiscal 2009 either were not placed up for competition or attracted only one bid.
The report (GAO-10-833), which the House Oversight and Government Reform Committee requested, highlighted contracts that appeared to be written with such narrowly defined requirements that only one company could reasonably compete. In other instances, program offices pressed for follow-on contracts to be awarded without competition to the existing company because it would be more expeditious since the offices already had formed a relationship with the firm.
“A Navy program official stated that, when one contractor has been performing a requirement for many years, it is easier to go back to the contractor personnel who understand the requirement rather than taking the time to find a new vendor,” the report said.
From fiscal 2005 to fiscal 2009, the reported obligations for noncompetitive contracts declined from 36 percent of total procurement spending to 31 percent, investigators found. But contracts in which only one offer was received remained steady at around 13 percent.
The report cited a host of reasons for contracts with only one bid. Often, companies are scared off by a competent incumbent contractor considered an overwhelming favorite to continue with the work, the watchdog said. Other times, solicitations might appear to favor one company, the report noted. In addition, some vendors that might have competed for work are forming teams to submit one offer, industry officials told GAO.
“Given the nation’s fiscal constraints, it is not acceptable to keep an incumbent contractor in place without competition simply because the contractor is doing a good job, or to resist legitimate suggestions that competition be imposed even though it may take longer,” the report said.
GAO recommended the Obama administration assess the reasons contracts are receiving only one offer. Daniel Gordon, administrator of the Office of Federal Procurement Policy at the Office of Management and Budget, has argued that one bid is not enough to constitute competition and that the practice limits agencies’ ability to consider qualified alternatives.
Recent OFPP guidance requires agencies to begin separating data collected on these contracts and to code them as “noncompetitive procurements using competitive procedures.” Gordon concurred with GAO’s recommendation.
But, it might be difficult to get sound data on contract competition. GAO randomly selected a sample of 107 contracts and orders that were coded as noncompetitive or receiving one bid, and reviewed the contract files. Eighteen percent of the contracts were coded incorrectly — as either not competed when they had been, or as competed with one offer received when they had not been competed at all, the report said.
In fiscal 2009, the Navy and the Air Force had some of the worst competition rates, with about 45 percent of contracts not competitive, GAO said. The Energy Department and Office of Personnel Management had among the lowest rates of noncompetition, at 7 percent and 5 percent, respectively.
The most common explanation for failing to conduct any competition was that “only one reasonable source” was available to perform the work, according to the GAO sample. In some cases, such as an Immigrations and Customs Enforcement contract for communications equipment and supplies, one contractor essentially owns the market.
In other instances, particularly with Defense Department weapons programs, the government is hamstrung by a lack of access to proprietary technical data, according to the watchdog. Companies’ expertise, experience and reluctance to sell technical data for a reasonable price generally preclude the possibility of competition, the report said.
Several contracting officials blamed the lack of competition on receiving short notice from program offices for acquisitions. With little time to conduct market research or properly define requirements — elements of a robust acquisition process — contracting officials often turn back to the incumbent, investigators said.
The second most frequently cited exception to competition was the authority to award sole-source contracts to firms in Small Business Administration’s 8(a) business development program. Through the program, agencies are encouraged to award participating 8(a) firms noncompetitive contracts worth less than $3.5 million when procuring services, or less than $5.5 million for manufacturing.
– by Robert Brodsky – GovExec.com – August 26, 2010
Small business program vulnerable to fraud, federal auditors say
August 20, 2010 by cs
It’s way too easy to get the Small Business Administration to approve fraudulent applications from companies seeking government contracts, federal auditors say.
Fake applications to a program meant for companies in economically distressed areas — including one from a firm claiming as its address the Alamo in Texas — sailed easily through the SBA’s vetting process after they were submitted by investigators, the Government Accounting Office said in a new report.
Moreover, 29 firms identified previously as wrongly participating in the program were awarded $66 million in federal contracts last year, the report said.
“We saw a lot of fraud in the program,” Matt Valenta, the GAO’s assistant director for Forensic Audits and Special Investigations, said Monday.
SBA officials took issue with that characterization, saying that the agency has implemented new procedures for detecting dishonest applications.
To test the SBA’s anti-fraud measures, Valenta said, his office submitted four fake applications, including one from the company at the Alamo and one at a city hall elsewhere in Texas. It is the third year in a row that the agency has submitted fake applications — and all have been accepted except one, he said, which was lost.
Investigators also took a second look at 29 companies identified in earlier audits as being ineligible for the program. This year’s investigation showed that those companies were still receiving federal contracts, Valenta said.
To qualify for the program, companies must be located in what the government calls a historically underutilized business zone, essentially an economically distressed area.
They must also meet the federal government’s definition of a small business, which varies from industry to industry, and 35% of their employees must live in the zone. Last year, the federal government entered into contracts worth nearly $3 billion with companies participating in the program.
Joseph Jordan, the SBA’s associate administrator of government contracting and business development, said the agency had worked hard to improve its fraud detection since the GAO first identified problems with it in 2008.
At that time, he said, the application process was conducted online, and companies were not required to prove that the information they sent in was true.
Since then, he said, the agency has begun requiring applicants to send paperwork documenting their eligibility. It has also implemented several other measures, including site visits to see if a firm is really located in a distressed area. Jordan said that by the end of this year, officials will have visited 1,000 of the approximately 10,000 companies participating in the program.
The GAO’s report was not fair, he said, because the applications submitted for the bogus companies at the Alamo and elsewhere were “expert forgeries.” He said investigators took a “cheap shot” at the SBA by saying that the 29 companies identified in previous audits were still receiving contracts.
Some of those companies were still eligible for the program, and others had received their new contracts before full investigations had been conducted, Jordan said.
Still, he said, the SBA would continue to work to eliminate fraud and abuse in its programs.
The agency’s fraud problems “are not going to be fixed overnight,” he said. “We’re working hard on this.”
– By Sharon Bernstein, Los Angeles Times, August 10, 2010, www.latimes.com/business/la-fi-0810-contract-fraud-20100810,0,1601570.story
Court rules against government, again, in small business parity
August 18, 2010 by cs
For the second time this year, the U.S. Court of Federal Claims has ruled that companies operating in Historically Underutilized Business Zones must have top priority among small businesses when competing for government contracts.
On Friday, the Court of Federal Claims found the Air Force violated the 1953 Small Business Act when it failed to first consider DGR Associates Inc., a HUBZone firm, before awarding a contract to an 8(a) small business. The set-aside procurement was for housing maintenance, inspection and repair services at Eielson Air Force Base in Alaska.
The ruling is the latest blow to the Justice Department and Small Business Administration as they attempt to navigate an increasingly complex regulatory issue that has divided the small business contracting community.
The Court of Federal Claims and the Government Accountability Office have determined that technical language in the Small Business Act puts HUBZone firms at the top of the small business pecking order. The Obama administration disagrees and has argued that Congress intended for there to be parity among small business programs.
In Friday’s case, the Court of Federal Claims issued a permanent injunction requiring the Air Force “to terminate the unlawful contract” awarded to General Trades and Services of Waipahu, Hawaii. The Air Force must issue a new solicitation and will be required to first consider DGR, the Terrell, Texas, firm that had been the incumbent on the contract.
DGR performed the military housing maintenance services on a five-year firm fixed-price contract, which expired in 2009.
After continuing for several months under a blanket purchase agreement, the Air Force notified the firm in June 2010 that it was ending the contract. The Air Force decided under the new contract it would limit competition to companies operating in SBA’s 8(a) Business Development program because the service wanted to boost its percentage of awards issued to small disadvantaged businesses, the court said. A contracting officer noted in documents that the Air Force had exceeded its HUBZone goals by more than 600 percent but missed its small disadvantaged business goal — which includes the 8(a) program — by 53 percent.
After the Air Force refused to reconsider its decision, DGR filed a protest with GAO. In May, the watchdog ruled in favor of the contractor. But, the Air Force, citing recent Justice Department and Office of Management and Budget guidance, disregarded the decision, noting GAO’s ruling was not binding. “Contracting officers are not to provide a priority to HUBZones,” Air Force officials told agency attorneys, according to correspondence Government Executive obtained.
Facing a July 15 termination of its contract, DGR took its case to the Court of Federal Claims, whose decisions are binding. In his decision, Judge Thomas C. Wheeler said the statute was unambiguous. “The language of the Small Business Act granting priority to the HUBZone program could not be more clear,” Wheeler wrote. “By using the phrases ‘notwithstanding any other provision of law . . . a contract opportunity shall be awarded on the basis of competition to qualified HUBZone small business concerns,’ Congress established a priority for the HUBZone program over other competing small business programs. . . . If Congress intended something different from what it stated, Congress alone must enact an appropriate amendment.”
Similar to the March 2010 Mission Critical Systems case involving an Army information technology contract, the decision came down to the words “shall” and “may.” The law that governs the 8(a) and the service-disabled veteran-owned business program states, “a contracting officer may award contracts” based on limited competition. The HUBZone statute uses the word “shall.” In both cases, the Court of Federal Claims ruled that before a contract can be set-aside under the 8(a) program, the contracting officer first must determine if two or more qualified HUBZone firms will submit offers.
Wheeler noted agencies that disagree with the ruling “would be better served to seek legislative relief from Congress rather than judicial relief in this Court.”
Sen. Mary Landrieu, D-La., is sponsoring a two-line bill that would change the HUBZone statute from “shall” to “may.” But the bill has only six co-sponsors and has not moved from Landrieu’s Small Business and Entrepreneurship Committee. An identical bill has stalled in the House.
Parity advocates are holding out hope lawmakers will be able to attach the language to the upcoming Defense authorization bill. But an attempt by the Senate to add similar parity language to last year’s Defense bill proved unsuccessful when a conference committee yanked the provision. While legislation remains in doubt, the dispute does appear to be reaching a judicial conclusion. The U.S. Court of Appeals for the Federal Circuit will soon hear Justice’s challenge of the Mission Critical Systems case. And, unlike the Court of Federal Claims, the appeals court’s ruling has precedential effect, meaning its decision would apply to future HUBZone priority cases.
– by Robert Brodsky – GovExec.com – August 16, 2010
Pentagon audit: Boeing violates federal account rules, may lose $271 million in government payments
August 17, 2010 by cs
Boeing should lose as much as $271 million in government payments for satellite launch services because the defense contractor violated federal accounting rules, the Pentagon’s audit agency said.
The Defense Contract Audit Agency, in a July 23 report, said the Pentagon should require Boeing to reimburse $72 million that was previously paid, agency director Patrick Fitzgerald said in an e-mail statement. Fitzgerald said the Defense Contract Management Agency, which monitors contractor performance, also should notify the joint Boeing-Lockheed Martin United Launch Alliance that the government won’t pay another $199 million in “unallowable” pending support costs.
United Launch Alliance builds Atlas and Delta rockets in Decatur for defense and commercial customers. Boeing’s Delta IV and Lockheed Martin’s Atlas V rockets are the primary methods for launching U.S. military satellites.
Boeing was notified of the finding on July 28 and doesn’t agree, a company spokesman said. The auditors reviewed whether Chicago-based Boeing improperly billed the Air Force in a 2006-2008 contract for labor, management, quality control and support costs that had been incurred between 1998 and 2006 in the Delta IV rocket program.
Boeing was “in non-compliance” with federal accounting standards that require billings to take place during the year when the costs were incurred, Fitzgerald said.
Boeing spokesman Joseph Tedino, in an e-mail statement, said “the costs at issue were legitimate costs of the Delta program,” which the government acknowledged by agreeing in 2006 to pay for those items. “Boeing believes its 2006 agreement was appropriate, and that the United Launch Alliance’s recovery of the costs is fully compliant” with government accounting standards, Tedino said.
Debra Bingham, a spokeswoman for the Defense Contract Management Agency, which is reviewing the audit recommendations, said that the agency’s Boeing manager in Huntington Beach, Calif., plans to render a final decision in November.
The official will review the audit agency’s analysis and recommendation, as well as Boeing’s rebuttal, she said. Boeing and Bethesda, Md.-based Lockheed Martin, the largest defense contractor, established the United Launch Alliance in December 2006 to consolidate the military launch business.
The audit was undertaken after the Government Accountability Office and the Pentagon’s inspector general last year uncovered problems with 14 audits of various programs and 62 pricing agreements at government locations in California. In Boeing’s case, a regional manager for the audit agency approved “a flawed audit that could have allowed Boeing to recover” the $271 million, Inspector General Gordon Heddell said in Sept. 23 testimony to Congress.
The regional manager, who wasn’t identified by the inspector general, overturned a draft audit conclusion that Boeing shouldn’t be paid anything because the company was in “potential violation of accounting standards,” Heddell said.
– by Tony Capaccio, Bloomberg News, Aug. 4, 2010
Army Corps of Engineers reinstate Ft. Benning hospital contractor
August 9, 2010 by cs
Last Thursday (Aug. 5, 2010) the Savannah District, U.S. Army Corps of Engineers reinstated the contract with Turner Construction Company Inc., of Huntsville, Ala., for the construction of the replacement for Martin Army Community Hospital at Fort Benning, Ga.
The reinstatement follows an order issued on July 8 from the U.S. Court of Federal Claims in Turner Construction Co., Inc. v. United States, No. 10-195C, in which the court overturned the contract termination. In the ruling, the judge ordered the Corps to reinstate the contract.
The Corps of Engineers terminated the hospital contract on March 23, 2010, after the Government Accountability Office (GAO) sustained two protests against the award of the contract to Turner Construction, finding two organizational conflicts of interest.
The Corps implemented the GAO recommendation to make a new award determination. Today’s reinstatement will allow Turner to proceed with the construction of the facility.
The contract, originally awarded on Sept. 28, 2009, for $333,359,000, proposes a new facility with 745,000 square feet of space designed to replace the existing 393,000 square feet hospital.
With 70 in-patient beds, the hospital will serve Soldiers, military retirees, and families of the Fort Benning community, providing a range of specialties. The design is split into two wings—a clinic and a hospital section, equipped with two parking decks for patients and staff members.
Defense races the clock on 2005 BRAC implementation
August 2, 2010 by cs
The Defense Department has just 14 months left to meet the deadline for implementing the largest base realignment and closure (BRAC) plan in history. Contracting and construction delays have left no margin for further delays in the department’s plans to relocate 123,000 personnel and execute hundreds of actions affecting more than 800 Defense locations by Sept. 15, 2011, according to a Government Accountability Office analysis.
What’s more, the department is doing all this as it undertakes complex military operations in Iraq and Afghanistan, restructures the Army, adds 92,000 ground troops to the ranks, and relocates to U.S. installations tens of thousands of personnel stationed overseas.
“All of these initiatives are exerting an unusually high demand on DoD’s domestic facility infrastructure to accommodate new forces and existing forces being deployed or redeployed,” said Brian Lepore, director of Defense capabilities and management at the Government Accountability Office, in a July 21 letter to key congressional committees.
GAO found Defense officials expect half of the 800 locations implementing BRAC recommendations will complete their actions in 2011, with 230 of them doing so in the final two weeks before the statutory deadline.
The 2005 BRAC itself is more ambitious than previous restructuring efforts because it focuses on transforming military operations, not just improving efficiency. “As opposed to simply closing bases, many of the BRAC 2005 recommendations involve complex realignments, such as designating where military forces returning to the United States from overseas bases would be located; establishing joint military medical centers; creating joint bases; and reconfiguring the defense supply, storage and distribution network,” Lepore noted.
Defense has estimated it will spend $35 billion on the 2005 BRAC, far more than the $26 billion it spent to implement the four previous BRACs combined. But GAO auditors found the department isn’t capturing the full cost associated with BRAC implementation.
For example, the Army had not fully reported costs for some things like temporary office space while permanent facilities are being built, and financial incentives offered to civilian employees to relocate.
“[Defense] officials do not have full visibility over the extent of these costs funded from outside the BRAC account, given that the services prepare their own BRAC budget justification material,” GAO said.
Six BRAC recommendations, three of which involve expansion at Fort Belvoir, Va., are of particular concern to department officials, GAO found:
- The closure of Fort McPherson, Ga., and relocation of U.S. Army Forces Command and U.S. Army Reserve Command Headquarters to Fort Bragg, N.C.
- Realignment of San Antonio Regional Medical Center functions and consolidation of enlisted medical training to Fort Sam Houston, Texas.
- Relocation of various services and functions from Walter Reed Army Medical Center in Washington to Bethesda, Md., and Fort Belvior, Va.
- Relocation of various Defense agencies and offices to Fort Belvoir, Va.
- Relocation of various Army leased sites in the national capital region to Fort Belvoir, Va.
- Relocation of medical command headquarters to a single contiguous site in the national capital region.
GAO noted the 2005 BRAC requires the Pentagon to relocate 19,300 military and civilian personnel to Fort Belvoir and involves 20 separate construction projects with an estimated cost of $4 billion. BRAC challenges at Fort Belvoir and other installations receiving large numbers of new personnel are exacerbated by concerns that local infrastructure, including roads, schools and medical facilities, cannot easily accommodate the influx.
Defense also faces significant personnel challenges. For example, many civilian employees are unable or unwilling to follow their jobs to new locations. In the Army, which is relocating headquarters for five commands under BRAC, officials are worried that BRAC might jeopardize support for ongoing military operations during a critical period. Navy officials told GAO very few employees have committed to moving to the Naval Air Weapons Station in China Lake, Calif., creating 1,000 vacancies at the new location, where distance from urban centers could make hiring more difficult. Attracting medical personnel to staff new facilities at Fort Sam Houston, Texas, is another concern, given the specialized nature of the positions and the department’s slow civilian hiring system, officials told GAO.
The Defense Department concurred with GAO’s assessment, and is following the watchdog’s recommendation to more fully capture BRAC costs and report them to Congress.
– By Katherine McIntire Peters – GovExec.com – July 26, 2010
Existing procurements got bulk of Recovery Act contract dollars
July 30, 2010 by cs
The federal government awarded more than two-thirds of the $26 billion in Recovery Act contract obligations through acquisition vehicles in place before the stimulus bill became law, according to a new report.
Pressure to act quickly on high-priority projects drove officials toward existing contracts, the Government Accountability Office reported on July 21. Officials were not concerned that a contract had been awarded before the American Recovery and Reinvestment Act was enacted in February 2009. When the contract was originally awarded, officials said the government had met its competition requirements, GAO reported.
RELATED STORY: Administration alters reporting rules for stimulus money
As of May, the government has awarded 68 percent of the $26 billion through pre-existing contracts, and 32 percent through new contracts. Of the newly awarded contracts, 89 percent of the funds were awarded competitively. The other 11 percent of the money, awarded without competition, went to companies in small-business programs, GAO reported.
Directed by the Obama administration to spend the stimulus money quickly, program and contracting officials found programs, projects and contracts that would allow them to award the money in a short time. In talking to contracting officers at five federal agencies, GAO said the officials considered both the risks of using non-competitive contracts and the benefits of spending the money faster than going through the process of awarding a new contract.
For example, a sole-source, small-business contract took the Army Corps of Engineers roughly four months to award, while a new competitive contract would have taken more than a year, GAO reported.
The administration objects to sole-source contracts, but GAO found agencies justified their reasons for awarding a contract without competition.
In addition, GAO found that early on inspectors general dedicated more time focusing on work that they believed was of higher risk, rather than looking at contract spending, including contracts awarded without competition.
GAO said it was okay to attend to the riskier projects when agencies were under pressure to spend the money. However, GAO officials are concerned that a lot of contracts have been awarded without competition — and without audits — through the Small Business Administration’s 8(a) Business Development program without audits, according to the report.
It’s significant, GAO said, because, while the 8(a) program has safeguards, they aren’t always set up properly.
In response, Joseph Jordan, SBA’s associate administrator for government contracting, objected to GAO’s implication that the 8(a) program is more susceptible to fraud than other programs.
“Suggestions of wrong-doing without supporting evidence are detrimental to the 8(a) program and its thousands of eligible program participants,” Jordan wrote. Even so, SBA officials have worked to prevent fraud, he added.
Inspectors general from the Defense Department and NASA said they were beginning audits on Recovery Act money. NASA’s IG told GAO it intends to launch audits of the funds, which includes seven contracts that were awarded through the 8(a) program.
In addition, the Energy Department IG didn’t consider its Recovery Act contracting as a high-risk area because a significant portion of the department’s funds went out through grants, according to its response to the GAO report.
– About the Author - Matthew Weigelt is acquisition editor for Federal Computer Week. Published in Washington Technology – July 22, 2010
Report finds DHS contracts over budget, behind schedule
July 9, 2010 by cs
The Homeland Security Department’s key acquisition programs are experiencing major cost growth and unexpected scheduling delays, according to a new report by the Government Accountability Office.
The report, which House Homeland Security Committee Chairman Rep. Bennie Thompson, D-Miss., released on Wednesday, provides a snapshot of DHS’ most complex acquisitions. The findings were not encouraging.
GAO examined 15 of the department’s largest and most critical acquisition programs. The contracts were split across six DHS components and had a combined $100 billion in total life-cycle costs and roughly $38 billion in direct procurement costs. Investigators found 12 of the programs reported cost overruns and almost all experienced schedule delays from the initial contractor estimates. Eight of the programs reported delays of one year or more.
In total, DHS’ contract spending has increased by 66 percent — from $8.5 billion in fiscal 2004 to $14.2 billion in fiscal 2009 — and its portfolio of complex acquisitions continues to expand.
“While DHS has made recent progress in clarifying acquisition oversight processes, much remains to be done to ensure proper implementation and departmentwide coordination,” wrote acting Comptroller General Gene Dodaro. “In a time of fiscal constraints, it is increasingly important that DHS’ acquisitions maximize resources to effectively meet critical homeland security missions.”
DHS officials attributed the ballooning price tag to poor planning. Some managers used cost estimation methods that did not follow best practices, such as fully defining program requirements, accounting for sustainment costs and including costs for the full life-cycle of an initiative, according to the report. The changes in life-cycle cost estimates ranged from decreases of more than 40 percent to upticks in excess of 500 percent.
For example, the BioWatch Generation-3 program to rapidly detect airborne biological agents has been delayed 18 months due to unavailability of vendor equipment, a change in testing responsibilities, and additional time required to complete DHS reviews, the report said. Meanwhile, the total acquisition costs of the Transportation Security Administration’s Passenger Screening Program have jumped from $1.8 billion to $2.5 billion, GAO found.
Investigators found other problems. Employees representing more than half the programs GAO reviewed awarded contracts without supervisors approving key planning documents that set operational requirements and established acquisition program baselines. Staffing shortages, funding problems, or a lack of sustainment planning hindered other programs, GAO said.
Thompson attributed many of the problems to Homeland Security’s decentralized acquisition system. “The department must undertake significant and concerted efforts to reform and centralize its procurement efforts, engage in strategic long-term, life-cycle planning for major acquisitions, and hire and train a sufficient number of personnel to decrease its reliance on outside contractors,” he said.
GAO did find the department was making progress in better overseeing its contracts and implementing a revised acquisition management directive. DHS has developed a database to track key program information, including cost and schedule performance, contract awards and program risks. At the component level, oversight officials are establishing new executive positions to manage the acquisition process, although their decision-making authority is limited, the report said.
In addition, the senior-level Acquisition Review Board reviewed 24 major acquisition programs in fiscal 2008 and 2009. More than 40 other major acquisition programs, however, have yet to be reviewed, GAO said.
In response, DHS said other senior acquisition staff members are conducting their own portfolio review process. In fiscal 2009, officials reviewed 61 of 67 major DHS acquisition programs, wrote Jerald Levine, director of the GAO and Office of Inspector General Liaison Office.
– By Robert Brodsky - GovExec.com – July 1, 2010