Pension Benefit Guaranty Corporation

Contract Management Needs Improvement Gao ID: T-HEHS-00-199 September 21, 2000

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. This testimony summarizes the September report, GAO/HEHS-00-130.

GAO noted that: (1) PBGC's contracting decisions and its organizational field structure have been heavily influenced by the need to service rapidly increasing workloads within existing federal staffing limitations; (2) because PBGC's focus was on obtaining needed staff quickly, it has not linked its contracting decisions to workload trends or strategic planning considerations and could be unprepared for future work environment changes; (3) GAO also identified weaknesses in PBGC's procurement planning and execution processes; (4) in particular, PBGC's consolidation of three formerly separate field office services procurements was not supported by a sound business rationale and may have limited competition; (5) for several other field office procurements, PBGC should have done more to stimulate competition by conducting market research to identify additional potential offerors; (6) in reviewing several other contracts, GAO identified additional weaknesses, including the need for PBGC to better document its basis for contractor awards and use more fixed-price rather than labor-hour contracts, which carry more cost and quality assurance risks; and (7) GAO also identified contractor oversight problems, including a lack of centralized data essential to monitoring contractor performance and deficiencies in PBGC's quality assurance review process.

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