Pension Benefit Guaranty Corporation

The Pension Benefit Guaranty Corporation (PBGC) sought to address a backlog of hundreds of thousands of pending benefit determinations by contracting for services. However, PBGC has not linked its contracting decisions to longer-term strategic planning considerations. Also, PBGC's procurement planning and execution processes do not stimulate competition for contract awards and they do not have sufficient rationale for contracts awarded. PBGC also does not adequately monitor the performance of contractors in the field and has a weak quality assurance review process. The broader management issues and day-to-day operational problems that GAO identified in PBGC's contracting practices could affect its ability to efficiently and cost-effectively serve the financial needs of millions of pension plan participants. GAO summarized this report in testimony before Congress; see: Pension Benefit Guaranty Corporation: Contract Management Needs Improvement by Barbara D. Bovbjerg, Associate Director for Education, Workforce and Income Security Issues, before the Senate Special Committee on Small Business and the Senate Committee on Small Business. GAO/T-HEHS-00-199, Sept. 21 (15 pages).

GAO noted that: (1) PBGC contracting decisions and its organizational field structure have been heavily influenced by the need to service rapidly increasing workloads within the existing federal staffing limitations; (2) faced with a significant influx of large pension plan failures beginning in the mid-1980s, PBGC chose to contract for services rather than seeking additional federal staff during a period of government downsizing; (3) PBGC cannot be assured that it has a cost-beneficial mix of contractor and federal employees, as federal policy requires, and risk being unprepared for future workload changes as defined benefit pension plans and participants decline; (4) GAO identified weaknesses in PBGC's procurement planning and execution processes; (5) in procuring management services for several other field benefit administration (FBA) office contracts, PBGC should have done more to stimulate competition by conducting outreach and market research activities to identify additional potential offerors; (5) PBGC risks paying too much for contracted services and receiving inferior performance; (6) GAO identified weaknesses in PBGC's contractor oversight activities; (7) PBGC has taken a number of actions to improve its management of contractors, including automating and centralizing several functions previously handled in the field locations to allow contractors and their staff to focus primarily on processing benefit determinations; (8) however, PBGC does not centrally compile FBA-specific data essential for monitoring the performance of contractors in field locations; (9) GAO identified weaknesses in PBGC's quality assurance review process for these field offices, and in its policies and procedural guidance for PBGC employees responsible for monitoring contracts; (10) furthermore, GAO is concerned that the current organization placement of PBGC's Contracts and Controls Review Department, which provides audit and internal review services to PBGC related to contracting may affect its independence; (11) at present, this office is located within the PBGC component that is the second-largest user of contracted services and reports to its head; and (12) the broader management issues and day-to-day operational weaknesses that GAO identified in PBGC's contracting practices could affect its ability to efficiently and cost-effectively serve the financial needs of millions of pension plan participants.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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