IRS Contracting
New Procedure Adds Price or Cost as a Selection Factor for Task Order Awards Gao ID: GAO-03-218 December 10, 2002The Internal Revenue Service (IRS) is in the midst of a massive effort to reorganize its structure and modernize its technology. To help with this effort, IRS obtains services through task orders under its Treasury Information Processing Support Services (TIPSS-2) contracting program. In this study, GAO reviewed the 6 largest competitive task orders that IRS awarded between July 1, 2001 and December 31, 2001 to determine if IRS used price or cost as a selection factor in the award of these task orders.
TIPSS-2 is IRS's largest service contracting program, obligating $543 million to 18 contracts from its beginning in June 2000 to June 20, 2002. Through the award of TIPSS-2 task orders, IRS obtains needed services in the areas of information systems, telecommunications, organizational/management, and operational support. IRS can continue ordering services under TIPSS-2 contracts into 2005. GAO found that IRS's procedures used in the award of competitive task orders under the TIPSS-2 program did not require contracting officers to consider price or cost as a selection factor in the award of task orders. Although contracting officers could have considered price or cost at their discretion, they did not for 5 of 6 competitive task orders GAO reviewed. IRS's procedures conformed to the version of the Federal Acquisition Regulation (FAR) that was in effect at the time the TIPSS-2 solicitation was issued. However, since then the FAR was changed. TIPSS-2 procedures conformed to the regulation in effect in 1999, but were not required to conform to the revised regulation. During our review, IRS developed and implemented a new procedure that provides for the consideration of price or cost as a selection factor for competitive task order awards. Additionally, the TIPSS-2 contract was changed to state that price or cost is a selection factor in the award of competitive task orders.
GAO-03-218, IRS Contracting: New Procedure Adds Price or Cost as a Selection Factor for Task Order Awards
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GAO: United States General Accounting Office:
Report to the Chairman and Ranking Minority Member, Committee on
Finance, U.S. Senate:
December 2002:
IRS Contracting:
New Procedure Adds Price or Cost as a Selection Factor for Task Order
Awards:
GAO-03-218:
GAO Highlights:
Highlights of GAO-03-218, a report to the Senate Committee on Finance:
December 2002:
IRS Contracting:
New Procedure Adds Price or Cost as a Selection Factor for Task Order
Awards:
Why GAO Did This Study:
The Internal Revenue Service (IRS) is in the midst of a massive effort
to
reorganize its structure and modernize its technology. To help with
this
effort, IRS obtains services through task orders under its Treasury
Information Processing Support Services (TIPSS-2) contracting program.
In this study, GAO reviewed the 6 largest competitive task orders that
IRS awarded between July 1, 2001 and December 31, 2001 to determine if
IRS used price or cost as a selection factor in the award of these task
orders.
What GAO Found:
TIPSS-2 is IRS‘s largest service contracting program, obligating $543
million to 18 contracts from its beginning in June 2000 to June 20,
2002.
Through the award of TIPSS-2 task orders, IRS obtains needed services
in the areas of information systems, telecommunications,
organizational/
management, and operational support. IRS can continue ordering services
under TIPSS-2 contracts into 2005.
GAO found that IRS‘s procedures used in the award of competitive task
orders under the TIPSS-2 program did not require contracting officers
to consider price or cost as a selection factor in the award of task
orders. Although contracting officers could have considered price or
cost at their discretion, they did not for 5 of 6 competitive task
orders
GAO reviewed.
IRS‘s procedures conformed to the version of the Federal Acquisition
Regulation (FAR) that was in effect at the time the TIPSS-2
solicitation
was issued. However, since then the FAR was changed. As the timeline
below
explains, TIPSS-2 procedures conformed to the regulation in effect
in 1999,
but were not required to conform to the revised regulation.
During our review, IRS developed and implemented a new procedure that
provides for the consideration of price or cost as a selection factor
for competitive task order awards. Additionally, the TIPSS-2 contract
was changed to state that price or cost is a selection factor in the
award
of competitive task orders.
Table: Timeline of TIPSS-2 program and policy events:
Date: August 1999; Item: Federal Acquisition Regulation (FAR);
Significance:
Contracting offiers should consider price or cost as a selection
factor,
but are not required to.
Date: September 1999; Item; TIPSS-2 program solicitation; Significance:
Timing of solicitation issuance places TIPPS-2 under August 1999
regulation.
Date: April 2000; Item: Revised FAR; Significance: Contracting officers
must
consider price or cost as a selection factor.
Source: GAO‘s analysis:
[End of table]
www.gao.gov/cgi-bin/getrpt?GAO-03-218.
To view the full report, including the scope and methodology,
click on
the link above. For more information, contact Michael Brostek,
Director,
Tax Issues, at (202) 512-9039 or brostekm@gao.gov.
Contents:
Letter:
Results in Brief:
Background:
Scope and Methodology:
TIPPS-2 Task Orders Were Awarded Using Proccedures That Did Not Require
Considering Price or Cost as a Selection Factor:
Conclusions:
Agency Comments and Our Evaluation:
Appendix I: Information on IRS‘s and the Federal Government‘s Contract
Obligations for Fiscal Years 1995 Through 2001:
Appendix II: Comments from the Internal Revenue Service:
Tables:
Table 1: Competitive Selection Process Used, June 2000 though June 20,
2002:
Table 2: Selection Factors and Obligations for Competitive TAsk Orders:
Table 3: IRS Contract Obligations by Service Category for Fiscal Year
2001:
Table 4: IRS Contract Obligations by Supplies and Equipment Category
for
Fiscal Year 2001:
Table 5: Total IRS TIPPS-2 Obligations by Contractor from June 2000
through
June 2002:
Figures:
Figure 1: IRS Contract Obligations for Fiscal Years 1995 through 2001:
Figure 2: Total Federal Government Contract Obligations for Fiscal
Years
1995 Through 2001:
Figure 3: Comparison of IRS to Total Federal Government Contract
Obligations
on a Percentage Basis, Fiscal Years 1995 through 2001:
Abbreviations:
FAR: Federal Acquisition Regulation:
FASA: Federal Acquisition Streamlining Act of 1994:
FPDS: Federal Procurement Data System:
IRS: Internal Revenue Service:
RFI: Request for Information:
TIPPS: Treasury Information Processing Support Services:
Letter:
December 10, 2002:
The Honorable Max Baucus, Chairman:
Senate Committee on Finance:
United States Senate:
The Honorable Charles E. Grassley, Ranking Member:
Senate Committee on Finance:
United States Senate:
The Internal Revenue Service (IRS) is in the midst of a massive and
multifaceted effort to reorganize its structure and modernize its
technology. Reorganization and modernization is intended to lay the
foundation for IRS to respond to taxpayers faster and more accurately.
To help with this effort, IRS obtains needed services through contracts
that were awarded under its Treasury Information Processing Support
Services (TIPSS-2) program. TIPSS-2 is a multiple award, task order
contracting program through which 18 contractors provide IRS with
information systems, telecommunications, organizational/management,
and operational support services under 18 contracts. Successor to a
similar program called TIPSS, TIPSS-2 covers contracts awarded in 2000
under which task orders can be issued until 2005. Once IRS identifies a
need for services, it can ask the contractors to compete for the
specific task, or, if a statutory exception applies,[Footnote 1] it can
award the task on a sole-source basis. From the beginning of the
program in June 2000 through June 20, 2002, IRS obligated $543 million
to TIPSS-2 contracts.
Given the importance of these services to the management and
administration of the tax system and a change in the Federal
Acquisition Regulation (FAR) regarding consideration of price or cost
that occurred after the TIPSS-2 solicitation was issued, you asked us
to report on whether IRS used price or cost as a selection factor in
TIPSS-2 task order awards and how its use of these factors compares to
federal contracting regulation. You also asked us to provide
information on IRS‘s overall contracting and how IRS‘s data compares to
government-wide contracting. This data appears in Appendix I. To report
on IRS‘s use of price or cost as a selection factor, we reviewed IRS‘s
procedures for issuing task orders under TIPSS-2 and federal policy on
task order competitions, and interviewed IRS officials. To provide data
on contracting trends, we obtained data from the Federal Procurement
Data System (FPDS) and from IRS‘s TIPSS-2 program office.
RESULTS IN BRIEF:
At the time of our review of task orders, IRS‘s procedures for issuing
competitive task orders under the TIPSS-2 contracts did not require
contracting officers to consider price or cost in selecting a
contractor. Under these procedures, contracting officers could have
considered cost or price if they chose to do so. We reviewed the 6
largest competitive task orders awarded in the final 6 months of
calendar year 2001 and found that contracting officers did not consider
price or cost as a selection factor for 5 of the 6 task orders.
IRS‘s procedures and the task orders we reviewed conformed with the FAR
that was applicable at the time the TIPSS-2 solicitation was issued.
That version of the FAR said that price or cost should be considered as
a selection factor but did not specifically require consideration of
price or cost. After the solicitation for the TIPSS-2 contracts was
issued, the FAR was revised to state that price or cost must be
considered as a selection factor for awarding task orders under
contracts awarded through solicitations issued on or after April 25,
2000. Therefore, TIPSS-2 is covered by the earlier version of the FAR
that states that contracting officers should consider rather than must
consider price or cost as a selection factor.
During our review, IRS developed and implemented a new TIPSS-2
competitive procedure that provides for the consideration of price or
cost as a selection factor. Additionally, IRS modified the TIPSS-2
contract so that cost will be a selection factor in the award of
competitive task orders. In a November 27, 2002 letter, the Acting
Commissioner of Internal Revenue generally agreed with the observations
in this report but said that our recommendation to make IRS‘s procedure
final was unnecessary because new procedures have been adopted. Since
IRS finalized its procedure for including price or cost as a selection
while developing its comments on our draft report, we agree the
recommendation is no longer necessary and revised the report
accordingly.
BACKGROUND:
TIPSS-2 is IRS‘s largest service contracting program. Through 18 task
order contracts, IRS obtains needed services in four broad areas:
information systems, telecommunications, organizational/management,
and operational support. Information systems covers software, security,
training, and quality assurance. Telecommunications includes network
traffic and trend analysis, systems design, and related disciplines.
Organizational/management involves business process reengineering,
process analysis, and project management support. Finally, operational
support relates to main frames, personal computers, local area
networks, file servers, installation, and training and help desk
support.
SCOPE AND METHODOLOGY:
To determine whether IRS used price or cost as a selection factor in
the issuance of TIPSS-2 task orders, we first obtained and reviewed
IRS‘s TIPSS-2 contract and award procedures. For each of the three
procedures for competitive task orders under TIPSS-2, we also obtained
data on the frequency with which each procedure was used in issuing
TIPSS-2 task orders between the beginning of TIPSS-2 in June 2000 and
through June 20, 2002.
Secondly, from the 51 task orders that IRS issued between July 1, 2001,
and December 31, 2001, we selected the 6 competitive task orders that
had the largest dollar value obligations. These 6 task orders had $21.4
million obligated and represented 29 percent of dollar obligations for
the period.[Footnote 2] We selected the last 6 months of calendar year
2001 as our universe because that was the most recent data available at
the time we did our work. We reviewed documentation for these 6 awards
to determine the extent that IRS considered price or cost as a
selection factor. Thirdly, we discussed the task order award process
with TIPSS-2 program office staff and IRS contracting officials
responsible for the TIPSS-2 program. We did not assess whether there
would be an impact resulting from contracting officers considering
price or cost as a selection factor for the award of task orders.
To compare IRS‘s procedures for awarding task orders under TIPSS-2 with
federal contracting policy, we reviewed applicable laws and regulations
and analyzed how IRS‘s procedures compared to the requirements in them.
At your request, we limited our work to the price or cost issue because
of its importance to the task order selection process and because of a
change in the FAR since the issuance of the TIPSS-2 solicitation that
now requires consideration of price or cost as a selection factor.
To compile the contracting information found in Appendix I, we obtained
data from the FPDS and from IRS‘s TIPSS-2 program office. We discussed
this data with officials in IRS‘s TIPSS-2 program office. Our analysis
uses current dollar obligations for the year in which funds were
obligated. We did not apply any index to normalize the obligated
amounts.
Our work was performed between May 2002 and November 2002 in accordance
with generally accepted government auditing standards.
TIPSS-2 TASK ORDERS WERE AWARDED USING PROCEDURES THAT DID:
NOT REQUIRE CONSIDERING PRICE OR COST AS A SELECTION FACTOR:
At the time of our review of task orders, IRS‘s competitive procedures
for awarding task orders under the TIPSS-2 contracts did not require
contracting officers to consider price or cost in selecting a
contractor. Contracting officers could have considered price or cost at
their discretion but did not for 5 of 6 large task orders we reviewed.
IRS‘s TIPSS-2 procedures conformed to the applicable federal regulation
at the time the TIPSS-2 solicitation was issued. However, that
regulation was revised after the issuance of the TIPSS-2 solicitation
to state that price or cost must be considered for the award of task
orders issued under contracts that were awarded through solicitations
issued on or after April 25, 2000.
For the competitive task order awards we reviewed, the TIPSS-2 contract
stated that selection factors may include, but are not limited to, such
factors as past performance, quality of deliverables, cost control,
price, cost, or other factors that the contracting officer believes are
relevant to the task order. In addition, the contract stated that the
contracting officer shall select one of the following three procedures,
or any combination of these procedures, for any requirement under the
contract. As described in the contract and program documents, the three
procedures are:
Standard: generally used for relatively simple, low dollar value items.
Contracting officers make a selection from an assessment of some or all
of the selection factors listed above.
Request for Information (RFI): generally used for items of moderate
complexity and estimated dollar value. The RFI is sent to all
contractors qualified to provide services under a task area, and the
selection is based on go/no-go or pass/fail factors stated in the RFI.
If more than one competitor meets all factors, the contracting officer
makes the selection using the Standard procedure above.
Best Value: generally used for complex items with higher dollar
estimates. Formal proposals will usually be requested and more formal
source selection factors may be used. The TIPSS-2 contract states that
price competition might be warranted for best value acquisitions, and
that this methodology may be used in conjunction with an RFI.
TIPSS-2 competitive procedures did not require that the contracting
officer consider price or cost in selecting a contractor for a task
order. The procedures left the use of price or cost to the discretion
of the contracting officer. Table 1 shows that most competitive task
orders from the beginning of TIPSS-2 in June 2000 to June 20, 2002 were
issued under the RFI procedure.
Table 1: Competitive selection process used, June 2000 through June 20,
2002.
[See PDF for image]
[1] One task order with obligations of $29,990 was classified as
unknown.
[2] The calculation of the percentages included the one task order that
was classified as unknown and the percentages do not equal 100 because
of rounding.
Source: GAO‘s analysis of data from IRS.
[End of table]
IRS had developed internal standard selection factors for the RFI
procedure which included: (1) demonstrating work similar in type and
scope as the task order; (2) demonstrating successful management of
similar tasks; and (3) ability to obtain employees or subcontractors
with the special skills and experience to perform the work.
All 6 of the competitive task orders we reviewed used the RFI
procedure. Based on our review of the task order files, the contracting
officer did not choose to use price or cost as a selection factor in 5
of the 6 task orders. The contracting officer considered price and cost
as a selection factor for the task order in which IRS acquired services
and equipment for its website--The Digital Daily. This task order
appears in the first row of Table 2 below. Table 2 shows the selection
factors and the dollar obligations for the task orders.
Table 2: Selection factors and dollar obligations for Competitive Task
Orders.
[See PDF for image]
[1] These obligations include obligations that were made during our
sample period from July 1, 2001 through December 31, 2001. The actual
obligations to these task orders may be higher when they are completed.
Source: GAO‘s analysis of data from IRS.
[End of table]
To preserve simplicity and flexibility, Congress provided contracting
officers with broad discretion to define evaluation and selection
procedures for placing orders. The Federal Acquisition Streamlining Act
of 1994 (FASA)[Footnote 3] authorizes the use of multiple award task
order contracts like TIPSS-2. The FAR further describes the fair
opportunity process for competitive task order awards. The August 1999
version of the FAR, applicable to the TIPSS-2 contracts, states that
contracting officers should consider factors such as past performance
on earlier tasks, quality of deliverables, cost control, price, cost,
or other factors that the contracting officer believes are relevant to
the award of a task order; and procedures and selection factors that
an agency uses to provide a fair opportunity to be considered for award
must be set forth in the solicitation and contract.[Footnote 4]
Although the August 1999 FAR language says that agencies should
consider the selection factors listed, including price or cost,
agencies were not required to do so. The solicitation for the award of
the 18 contracts under TIPSS-2 was issued on September 13, 1999 and
fell under these provisions. Thus, the TIPSS-2 procedures and the
specific task orders we reviewed are acceptable under the applicable
FAR provision. However, the FAR was changed to state that contracting
officers must consider price or cost as a selection factor for
competitive task orders. All multiple award task order contract
programs, like TIPSS-2, that had solicitations for contracts issued on
or after April 25, 2000 are required to consider price or cost as
selection factors for competitive task orders.[Footnote 5] Since the
TIPSS-2 solicitation was issued before April 25, 2000, TIPSS-2 is
covered by the earlier version of the FAR.
We discussed the lack of price or cost as a standard selection factor
in the task order awards with IRS‘s TIPSS-2 program officials, IRS‘s
contracting officials responsible for the TIPSS-2 program, and IRS
contracting officials responsible for IRS contracting policy. These
officials recognized the benefit of considering price or cost as a
selection factor. During our review, IRS developed and implemented a
new procedure that uses price or cost as a selection factor in
competitive task orders under TIPSS-2. Additionally, the TIPSS-2
contract was modified so that cost will be a selection factor in
competitive task orders awards.
CONCLUSIONS:
The competitive task order awards under TIPSS-2 from its beginning in
June 2000 through June 20, 2002 were awarded using procedures that did
not require price or cost as a selection factor, but left this to
contracting officers‘ discretion. In 5 of 6 cases we reviewed,
contracting officers did not use that discretion to consider price or
cost in making selections. Because consideration of price or cost helps
agencies to ensure that they obtain the best value in awarding
contracts, the FAR now requires that price or cost must be used as a
selection factor in awarding task orders. Although this provision does
not apply to the TIPSS-2 program because the TIPSS-2 solicitation was
issued before the regulation was effective, the FAR provision
applicable to the TIPSS-2 program states that the contracting officer
should consider factors such as price or cost in awarding a task order.
IRS recognized that including price or cost as a selection factor would
improve the task order selection process and developed and implemented
new procedures that consider price or cost as a selection factor in the
award of task orders.
AGENCY COMMENTS AND OUR EVALUATION:
On November 27, 2002, we received written comments on a draft of this
report from the Acting Commissioner of Internal Revenue (see Appendix
II). The Acting Commissioner stated that IRS generally agreed with the
draft report but believed our recommendation that IRS finalize
procedures for including price or cost as a selection factor was
unnecessary.
Specifically, the Acting Commissioner stressed that IRS‘s contracting
officials agreed with our observations in the draft report about the
value of considering price or cost as a selection factor for
competitive task order awards. He explained that, during our review,
IRS had taken steps to include price or cost as a selection factor in
TIPSS-2 task order awards and that IRS issued its final procedure on
November 19, 2002. Since IRS finalized the procedure while commenting
on our draft, we agree that this action made our recommendation
unnecessary and we deleted it from this report.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter. At that time, we will send copies of this
report to the Chairman and Ranking Minority Member of the House
Committee on Ways and Means and the Chairman and Ranking Minority
Member of the Subcommittee on Oversight, House Committee on Ways and
Means. We are also sending copies to the Secretary of the Treasury; the
Acting Commissioner of Internal Revenue; the Administrator of Federal
Procurement Policy, and other interested parties. We will make copies
available to others on request.
If you have any questions or would like additional information, please
call me at (202) 512-9039 or Joseph Jozefczyk at (202) 512-9053. Key
contributors to this report are Michael Kassack, Christine Davis, and
Katherine Davis.
Sincerely yours,
Michael Brostek:
Director, Tax Issues:
Signed by Michael Brostek:
[End of section]
Appendix I: Information on IRS and Federal Government Contract
Obligations for Fiscal Years 1995 Through 2001:
IRS‘s contract obligations increased, with some fluctuation, from about
$735 million in fiscal year 1995 to about $1.4 billion in fiscal year
2001--an increase of almost 86 percent. This increase, particularly
that occurring after 1997, may be at least partially attributable to
the systems and organizational changes resulting from the IRS
Restructuring and Reform Act of 1998.[Footnote 6]
Figure 1: IRS Contract ObligationsA for Fiscal Years 1995 Through 2001
[See PDF for image]
[A] Only includes funds newly obligated in the given fiscal year.
[B] Service obligations include funding for TIPSS-2 contracts task
orders
since their inception in June 2000.
Source: GAO‘s analysis of data from the Federal Procurement Data
System.
[End of figure]
Figure 1 also shows that from fiscal years 1995 through 2001, IRS
contracts for services consistently represented the largest proportion
of dollar obligations--increasing from $392.2 million in fiscal year
1995 to $879.2 million in fiscal year 1999 and declining somewhat to
$787.8 million in fiscal year 2001. The overall increase between fiscal
years 1995 and 2001 was almost 101 percent. Key services purchased by
IRS include automatic data processing and telecommunications;
professional, administrative, and management support; and utilities &
housekeeping.
Total federal government contract obligations grew from $176.2 billion
in fiscal year 1995 to $217.7 billion in fiscal year 2001--an increase
of about 23.6 percent. Figure 2 shows that on a year-to-year basis,
total federal government contract obligations increased every year,
with the exception of the fiscal year period 1996 to 1997, when
obligations decreased by about 1.3 percent. As with IRS, the purchase
of services represented the largest proportion of federal government
contract obligations from fiscal years 1995 to 2001.
Figure 2: Total Federal Government Contract ObligationsA for Fiscal
Years 1995 Through 2001:
[See PDF for image]
[A] Executive branch only, including IRS.
[B] Only includes funds newly obligated in the given fiscal year.
Source: GAO‘s analysis of data from the Federal Procurement Data
System.
[End of figure]
Figure 3 shows that when compared with total federal government
contract obligations on a proportional basis for fiscal years 1995 to
2001, IRS‘s percentages fluctuate more than they do for the federal
government as a whole. For the total federal government, supplies and
equipment contract obligations only range from a low of 35 percent of
the total in fiscal year 1999 to a high of 37.7 percent in fiscal year
2000. IRS supply and equipment contract obligations range from a low of
24.5 percent of the total in fiscal year 1998 to a high of 44.4 percent
in fiscal year 1995. Likewise, total federal government contract
obligations for services ranged from a low of 48.3 percent of the total
in 1995, to a high of 52 percent in fiscal year 1999. On the other
hand, IRS contract obligations for service contracts range from a low
of 53.3 percent of the total in fiscal year 1995 to a high of 74.6
percent in fiscal year 1998.
Figure 3: Comparison of IRS to Total Federal Government Contract
ObligationsA on a Percentage Basis,B Fiscal Years 1995 Through 2001
[See PDF for image]
[A] Only includes funds newly obligated in the given fiscal year.
[B] Percentages may not add to 100 due to rounding.
[C] The supply and equipment category includes funds obligated for the
purchase of items ranging from ADP equipment and software; to books,
maps, and other publications; and to office supplies and furniture.
[D] The services category includes funds obligated for the purchase of
services ranging from ADP and telecommunications; to professional,
administrative, and management support; to transportation, travel, and
relocation; and to education and training.
[E] The Research and Development (R&D) category includes funds
obligated
for any of the 6 R&D phases and is classified in areas ranging from
agriculture and defense through transportation, social services, and
space. Only a small proportion of IRS contract obligations were for
R&D.
Source: GAO‘s analysis of data from the Federal Procurement Data
System.
[End of figure]
Table 3 identifies the major types of contractual services for which
IRS obligated funds in fiscal year 2001, the most current year for
which complete data are available. IRS‘s 5 largest service contract
categories combined represent about 95 percent of the total service
dollar obligations. Automatic Data Processing (ADP) and
Telecommunications services alone represented 70.7 percent of the total
obligations of about $788 million.
Table : IRS Contract Dollar Obligations by Service Category for FY
2001:
(Dollars in thousands).
[See PDF for image]
Source: GAO‘s analysis of data from the Federal Procurement Data
System.
[End of table]
Table 4 identifies the major types of contractual supplies and
equipment purchases for which IRS obligated funds in fiscal year 2001,
the most current year for which complete data are available. IRS‘s
contract dollar obligations for its 5 largest supply and equipment
purchase categories combined represent about 98.6 percent of the total
supplies and equipment obligations of about $579 million. Contractual
obligations for ADP Equipment, Software, Supplies and Support Equipment
alone accounted for about 81.2 percent of the total.
Table 4: IRS Contract Dollar Obligations by Supplies and Equipment
Category for FY 2001:
(Dollars in thousands).
[See PDF for image]
Source: GAO‘s analysis of data from the Federal Procurement Data
System.
[End of table]
Table 5 lists the prime contractors for all 18 of the IRS TIPSS-2
contracts and the funds that IRS has obligated to each of these
contractors under the TIPSS-2 program.[Footnote 7] In our letter, we
discuss our review of 6 competitive task order awards under IRS‘s
TIPSS-2 program. In terms of dollar obligations, Booz, Allen & Hamilton
is the largest of the 18 TIPSS-2 contractors, with about 34 percent of
the total contract dollars. Systems Research and Applications Corp.,
Northrup Grumman Information Technology, Inc., and Accenture LLP also
have significant proportions of the total--10.9 percent, 10 percent,
and 9.2 percent, respectively.
Table 5: Total IRS TIPSS-2 Obligations by Contractor from June 2000
through June 2002:
(Dollars in thousands):
[See PDF for image]
Source: IRS‘s TIPSS Program Office‘s Contract Management System.
[End of table]
Appendix II: Comments from the Internal Revenue Service:
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE WASHINGTON, D.C.
20224:
COMMISSIONER:
November 27, 2002:
Mr. David M. Walker Comptroller General U.S. General Accounting Office
441 G Street, NW Washington, D.C. 20548:
Dear Mr. Walker:
I am responding to your draft report titled, IRS Contracting: Task
Order Selection Factors Should Include Price or Cost. The GAO reviewed
selected task orders under the Treasury Information Processing Support
Services (TIPSS-2) contracting program to determine if we used price or
cost as a selection factor for award. We obtain information processing
services to support modernization and other programs using this
multiple-award, task order contracting program. The GAO found that our
procedures for the TIPSS-2 program did not require contracting officers
to consider price or cost. We generally agree with the draft report and
we believe the recommendation is unnecessary.
In discussions with the GAO during the audit, our contracting officials
emphasized they recognized the value of considering price or cost for
competitive task orders and were developing a procedure requiring its
use. On July 17, 2002, we changed all 18 TIPSS-2 contracts to reflect
that cost is always a selection factor. As the GAO report indicates, we
issued the draft ’Standard Operating Procedure for TIPSS-2
Competitions“ on September 13, 2002. On November 19, 2002, we issued
the final procedure. We have implemented and tested the revised
competitive procedure and it is working well.
We agree with the draft report‘s observations on the value of
considering price or cost for competitive task orders and have
finalized our procedures implementing this approach. Therefore, we ask
that you delete the recommendation to adopt a final procedure.
Sincerely,
Bob Wenzel:
Acting Commissioner:
Signed by Bob Wenzel:
[End of section]
FOOTNOTES
[1] Exceptions for sole-source awards involve unusually urgent needs;
unique or highly specialized requirements; the promotion of economy and
efficiency because the order is a logical follow-on to a previous
order; and satisfaction of a required minimum guarantee amount. 41
U.S.C. 253j(b)
[2] Although these task orders account for a large value, we cannot
project our findings to the overall TIPSS-2 contracts because it is a
judgmental sample.
[3] P.L. 103-355 (Oct. 13, 1994).
[4] FAR 16.505(b)(1), (3) (FAC 97-12).
[5] FAR 16.505(b)(1)(ii)(E). See Competition Under Multiple Award
Contracts, 65 Fed. Reg. 24317 (2000).
[6] P.L. 105-206 (July 22, 1998)
[7] Eighteen TIPSS-2 contracts were awarded in the mid-2000 timeframe.
TIPSS-2 task orders can be awarded through June 2005 and are
categorized in 4 principal task service areas--information systems,
telecommunications support, organizational management, and operational
support. TIPSS-2 obligations are classified as automatic data
processing and telecommunications services when reported in the Federal
Procurement Data System. As such, the TIPSS-2 obligations are also
included in Figures 1, 2, and 3 as a portion of the IRS and federal
government obligations for services for fiscal years 2000 and 2001.
Likewise, TIPSS-2 obligations are included as a portion of the ADP and
Telecommunications Services category in Table 3 and as a portion of the
IRS obligations associated with the corresponding contractors in Table
5.
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