Procurement of Support Services at the Transportation Systems Center

Gao ID: 116913 November 23, 1981

The Transportation Systems Center currently uses seven support service contracts to support its technical staff, provide certain employee services, and assist in the operation of the facility. The cost of these contracts for fiscal year 1981 was approximately $8.3 million.

During a review, GAO noted that costs for the Center's health unit were excessive. The contract called for health services which were greater than those offered to other Federal employees in the area. All of the Center's permanent employees were eligible to receive these services. In contrast, other Federal agencies in the area usually provide funds for approximately 10 percent of their employees to receive these services. Thus, the number of services provided appeared to be excessive. From November 1979 through October 1980, only 249 annual physicals and health screenings were provided, less than 60 percent of the 425 estimated in the contract. Thus, the contractor received payments for extensive services under a firm-fixed price contract while actually providing substantially fewer services. Substantial cost savings would result if the health services offered to Center employees were comparable to those offered to other Federal employees and the Center paid only for the services which were provided. Additionally, the Center did not prepare the cost comparisons required by the Office of Management and Budget (OMB) Circular A-76 before awarding its two largest support service contracts. The Circular requires a detailed comparison of contract versus in-house costs to determine which would be most economical. The Center did not make the cost comparisons because it felt that they were not necessary in a labor surplus area. Awarding a contract for performance in a labor surplus area does not exempt an agency from performing the required cost comparison.


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