Interagency Contracting
Problems with DOD's and Interior's Orders to Support Military Operations Gao ID: GAO-05-201 April 29, 2005In recent years, federal agencies have increasingly turned to interagency contracts--where one agency, for example, places an order under an existing contract for another agency--as a way to streamline the procurement process. Interagency contracting can offer benefits of improved efficiency, but this approach needs to be effectively managed. To learn more about some of the challenges of interagency contracting, we reviewed the process that the Department of Defense (DOD) used to acquire interrogation and certain other services through the Department of the Interior to support military operations in Iraq. On behalf of DOD, Interior issued 11 task orders, valued at over $66 million, on an existing contract. This report identifies breakdowns in the procurement process, contributing factors that led to the breakdowns, and the extent to which recent actions by Interior and DOD address these contributing factors.
DOD, faced with an urgent need for interrogation and other services in support of military operations in Iraq, turned to the Department of the Interior for contracting assistance. Numerous breakdowns occurred in the issuance and administration of the orders for these services. The breakdowns included issuing orders that were beyond the scope of the underlying contract, in violation of competition rules; not complying with additional DOD competition requirements when issuing task orders for services on existing contracts; not properly justifying the decision to use interagency contracting; not complying with ordering procedures meant to ensure best value for the government; and inadequate monitoring of contractor performance. Because the officials at Interior and the Army responsible for the orders did not fully carry out their roles and responsibilities, the contractor was allowed to play a role in the procurement process normally performed by the government. A lack of effective management controls--in particular insufficient management oversight and a lack of adequate training--led to the breakdowns. When these management controls are not in place, particularly in an interagency fee-for-service contracting environment, more emphasis can be placed on customer satisfaction and revenue generation than on compliance with sound contracting policy and required procedures. Significant problems in the way Interior's contracting office carried out its responsibilities in issuing the orders for interrogation and other services on behalf of DOD were not detected or addressed by management. Further, the Army officials responsible for overseeing the contractor, for the most part, lacked knowledge of contracting issues and were not aware of their basic duties and responsibilities. In response to the above concerns, Interior and DOD have taken actions to strengthen management controls. For example, Interior has re-issued or clarified several policies for its contracting personnel and has required them to take training on the proper use of General Service Administration contracts. DOD has issued a new policy requiring that military departments and defense agencies establish procedures for reviewing and approving the use of other agencies' contracts. These actions are a positive step toward addressing some of the contributing causes to the breakdowns GAO found, but it is too soon to tell how effective they will be.
RecommendationsOur 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.
Director: Team: Phone:GAO-05-201, Interagency Contracting: Problems with DOD's and Interior's Orders to Support Military Operations
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
April 2005:
Interagency Contracting:
Problems with DOD's and Interior's Orders to Support Military
Operations:
GAO-05-201:
GAO Highlights:
Highlights of GAO-05-201, a report to congressional committees.
Why GAO Did This Study:
In recent years, federal agencies have increasingly turned to
interagency contracts”where one agency, for example, places an order
under an existing contract for another agency”as a way to streamline
the procurement process. Interagency contracting can offer benefits of
improved efficiency, but this approach needs to be effectively managed.
To learn more about some of the challenges of interagency contracting,
we reviewed the process that the Department of Defense (DOD) used to
acquire interrogation and certain other services through the Department
of the Interior to support military operations in Iraq. On behalf of
DOD, Interior issued 11 task orders, valued at over $66 million, on an
existing contract.
This report identifies breakdowns in the procurement process,
contributing factors that led to the breakdowns, and the extent to
which recent actions by Interior and DOD address these contributing
factors.
What GAO Found:
DOD, faced with an urgent need for interrogation and other services in
support of military operations in Iraq, turned to the Department of the
Interior for contracting assistance. Numerous breakdowns occurred in
the issuance and administration of the orders for these services. The
breakdowns included
* issuing orders that were beyond the scope of the underlying contract,
in violation of competition rules;
* not complying with additional DOD competition requirements when
issuing task orders for services on existing contracts;
* not properly justifying the decision to use interagency contracting;
* not complying with ordering procedures meant to ensure best value for
the government; and
* inadequate monitoring of contractor performance.
Because the officials at Interior and the Army responsible for the
orders did not fully carry out their roles and responsibilities, the
contractor was allowed to play a role in the procurement process
normally performed by the government.
A lack of effective management controls”in particular insufficient
management oversight and a lack of adequate training”led to the
breakdowns. When these management controls are not in place,
particularly in an interagency fee-for-service contracting environment,
more emphasis can be placed on customer satisfaction and revenue
generation than on compliance with sound contracting policy and
required procedures. Significant problems in the way Interior‘s
contracting office carried out its responsibilities in issuing the
orders for interrogation and other services on behalf of DOD were not
detected or addressed by management. Further, the Army officials
responsible for overseeing the contractor, for the most part, lacked
knowledge of contracting issues and were not aware of their basic
duties and responsibilities.
In response to the above concerns, Interior and DOD have taken actions
to strengthen management controls. For example, Interior has re-issued
or clarified several policies for its contracting personnel and has
required them to take training on the proper use of General Service
Administration contracts. DOD has issued a new policy requiring that
military departments and defense agencies establish procedures for
reviewing and approving the use of other agencies‘ contracts. These
actions are a positive step toward addressing some of the contributing
causes to the breakdowns GAO found, but it is too soon to tell how
effective they will be.
What GAO Recommends:
A number of corrective actions are already underway, such as clarifying
policies and adding training requirements. GAO makes recommendations on
steps that Interior and DOD should take to further refine their efforts.
In written comments, both agencies agreed with the recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-05-201.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact David E. Cooper at
(202)-512-4841or cooperd@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Breakdowns Occurred When Interior Procured Interrogation and Other
Services for DOD:
Need for Strong Management Controls:
Too Early to Tell If Actions to Increase Oversight and Improve Training
Will Be Effective:
Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: Comments from the Department of the Interior:
Appendix IV: Comments from CACI International Inc.
Appendix V: Summary of Task Orders Issued to CACI for Work in Iraq:
Table:
Table 1: Comparison of Labor Categories from DOD's Statements of Work
to the Information Technology Contract:
Abbreviations:
BPA: blanket purchase agreement:
CACI: CACI International, Inc.
CJTF-7: Coalition Joint Task Force Seven:
COR: contracting officer's representative:
DOD: Department of Defense:
FAR; Federal Acquisition Regulation:
GSA: General Services Administration:
IG: Inspector General:
United States Government Accountability Office:
Washington, DC 20548:
April 29, 2005:
The Honorable John Warner:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Committee on Armed Services:
United States Senate:
The Honorable Duncan Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
In recent years, federal agencies have made a major shift in the way
they buy goods and services, turning increasingly to interagency
contracts as a way to streamline the procurement process. Interagency
contracting occurs when an agency needing supplies or services obtains
them from another agency, often for a fee. For example, an agency can
use an existing contract that has already been awarded by another
agency, or turn to another agency to issue and administer task orders
on its behalf.[Footnote 1] Interagency contracting can offer the
benefits of improved efficiency and timeliness, but this approach needs
to be effectively managed. Use of these contracts demands a high degree
of business acumen and flexibility on the part of the federal
acquisition workforce. Due to the challenges associated with
interagency contracts, we recently designated interagency contracting
as a governmentwide high-risk area.[Footnote 2]
The process that the Department of the Interior used to acquire
interrogation and certain other services for the Department of Defense
(DOD) during military operations in Iraq provides insight into aspects
of interagency contracting that need careful attention. By August 2003,
DOD was faced with a critical and largely unforeseen need for
interrogators and screeners, some of whom were needed at Abu Ghraib
prison. DOD had in place only a contingency contracting office in Iraq
at the time, whose efforts were focused on obtaining basic necessities
such as portable sanitation facilities and water trucks. To obtain
interrogation and other services quickly, DOD relied on an Interior
contracting office that specializes in awarding and administering
contracts for other agencies through fee-for-service arrangements. Over
an 8-month period, the Interior contracting office issued 11 task
orders, valued at over $66 million, to CACI International, Inc. (CACI)
on behalf of DOD. Of the 11 orders, 6 were for interrogation,
screening, and other intelligence-related services, and 5 were for
logistics support services. Interior placed the task orders on an
information technology contract that CACI had in place with the General
Services Administration (GSA) under GSA's Schedule program.[Footnote 3]
The Interior Inspector General (IG) and GSA subsequently determined
that 10 of the 11 orders were out of scope of the information
technology contract. Following the disclosure of the prisoner abuse at
Abu Ghraib and the implication of contractor employees in the abuse,
questions arose about how DOD used Interior to acquire interrogators
and screeners on an information technology contract and, more
generally, about the integrity of the federal procurement process.
To learn more about some of the challenges associated with interagency
contracting, we assessed (1) breakdowns that occurred in the
procurement process when Interior placed orders with CACI for
interrogation and other services in Iraq, (2) factors that led to the
breakdowns, and (3) the extent to which recent or planned actions by
Interior and DOD address these factors. To help ensure that the
corrective actions underway will fully address the problems, we are
recommending steps Interior and DOD can take to further refine those
efforts.
We conducted our work at Interior, DOD, and GSA. In addition, we spoke
with Army program officials who were responsible for overseeing the
contractor's performance in Iraq and with contractor employees and
representatives. Appendix I contains more detail on our scope and
methodology. Appendix V contains a summary of the 11 orders for
interrogation and other services in Iraq. We conducted our review from
July 2004 to January 2005 in accordance with generally accepted
government auditing standards.
Results in Brief:
Numerous breakdowns occurred in the issuance and administration of
Interior's task orders for interrogation and other services on behalf
of DOD for military operations in Iraq. These breakdowns included:
* orders for services beyond the scope of the underlying contract, in
violation of competition rules;
* not complying with additional DOD competition requirements when
issuing task orders for services on existing contracts;
* not properly justifying the decision to use interagency contracting;
* not complying with ordering procedures meant to ensure best value for
the government; and:
* inadequate monitoring of contractor performance.
Because DOD and Interior officials effectively abdicated certain
contracting responsibilities, the contractor was allowed to play a
large role in aspects of the procurement process normally performed by
government personnel.
The situation in Iraq at the time the orders for interrogation and
other services were placed was extraordinary--a wartime environment and
an atmosphere of turmoil and urgency. Nevertheless, a lack of
management controls--in particular insufficient management oversight
and a lack of adequate training--led to the breakdowns. When these
controls are not in place, particularly in an interagency fee-for-
service contracting environment, more emphasis can be placed on
customer satisfaction and revenue generation than on compliance with
sound contracting policy and required procedures. Significant problems
in the way Interior's contracting office carried out its
responsibilities in issuing the orders for interrogation and other
services on behalf of DOD were not detected or addressed by management.
Further, the Army officials responsible for overseeing the contractor,
for the most part, lacked knowledge of contracting issues and were not
aware of their basic duties and responsibilities in administering the
orders.
The high-profile nature of the interrogation orders has served to focus
attention on ways to improve the use of interagency contracts. Interior
and DOD have taken actions to strengthen management controls. For
example, Interior has re-issued or clarified several policies for its
contracting personnel and has required them to take training on the
proper use of GSA contracts. DOD has issued a new policy designed to
improve oversight of its use of other agencies' contracts, but it has
left implementation to the individual departments and agencies and does
not have a mechanism in place to provide for departmentwide monitoring
of the policy's implementation. While these actions are a positive step
toward addressing some of the causes to the breakdowns with the orders,
it is too soon to tell how effective they will be.
Because a number of corrective actions are already underway, we make
recommendations in this report on steps that Interior and DOD should
take to further refine their efforts to improve management oversight
and training. In written comments on a draft of this report, both
agencies agreed with the recommendations and discussed actions they are
taking to implement them. We also received written comments from CACI.
While acknowledging that our report identifies a number of areas where
the government can improve its contracting processes, CACI raised
several issues that it believes we did not adequately address. The
comments from DOD, Interior, and CACI are discussed beginning on page
21 and are reproduced in their entirety in appendices II, III, and IV,
respectively.
Background:
In recent years, agencies have increasingly placed orders against
existing contracts that have been awarded by another agency to save
time and administrative effort. Rather than going through the often
lengthy process involved in awarding a new contract for services--
soliciting offers, evaluating proposals, and awarding the contract--
agencies can place task orders against established indefinite quantity
contracts that meet their needs. When placing orders against multiple-
award task order contracts, agencies are generally required to ensure
that contractors have a fair opportunity to be considered for each
order with certain exceptions (such as urgency or logical follow-on).
For GSA Schedule contracts, agencies are required to follow ordering
procedures such as reviewing prices from at least three contractors,
evaluating prices for services requiring a statement of work, and
seeking price reductions for large orders.
Interagency contracting is often handled by entrepreneurial, fee-for-
service organizations, where agency contracting units operate like a
business and provide contracting assistance to other agencies for a
fee. The Interior contracting office that placed the orders for
interrogation and other services--the Southwest Branch of Interior's
National Business Center, located in Fort Huachuca, Arizona--is one
such organization. This office's contracting activity, primarily on
behalf of other agencies, has increased substantially over the past 3
years, with reported obligations increasing from $609 million in fiscal
year 2002 to $1.02 billion in fiscal year 2004.
The fee-for-service procurement process generally involves three
parties: the agency requiring a good or service; the agency placing the
order or awarding the contract; and contractors providing the goods and
services the government needs. The requiring agency officials determine
the goods or services needed and, if applicable, prepare a statement of
work, sometimes with the assistance of the ordering organization. The
contracting officer at the ordering office ensures that the contract or
order is properly awarded or issued (including any required
competition), and administered under applicable regulations and agency
requirements. If contract performance will be ongoing, a contracting
officer's representative--generally an official at the requiring agency
with relevant technical expertise--is normally designated by the
contracting officer to monitor the contractor's performance and serve
as the liaison between the contracting officer and the contractor.
At the same time as use of interagency contracting has increased, DOD
has also increased its use of contractors in military operations.
Particularly since the 1991 Gulf War, contractors have taken over
support positions that were traditionally filled by government
personnel. For example, a company that CACI later acquired began
providing intelligence support to the Army in Germany in 1999.[Footnote
4] When the Army in Europe deployed intelligence personnel to the Iraq
theater in 2003, CACI employees went with them. Following the
announcement of the end of major combat in May 2003, the Army, as part
of the Coalition Joint Task Force Seven (CJTF-7), was expecting a non-
hostile situation and did not plan for an insurgency.[Footnote 5] It
was unprepared for the volume of Iraqi detainees and the need for
interrogation and other intelligence and logistics services. An Army
investigative report from August 2004 noted that the CJTF-7
headquarters in Iraq lacked adequate personnel and equipment and that
the military intelligence units at Abu Ghraib were severely under-
resourced.
The out-of-scope orders for interrogation and other services issued by
Interior have been terminated. However, the Army has continued
contracting for intelligence functions and logistics services through
bridge contracts awarded on a sole source basis to CACI. The original
term of the contracts was 4 months, and the Army subsequently exercised
options for an additional 2 months, through early 2005. According to an
Army official, the contract terms were recently extended further to
allow the Army adequate time to competitively award contracts for these
services.[Footnote 6]
Recently, in the Ronald W. Reagan National Defense Authorization Act
for Fiscal Year 2005, [Footnote 7] Congress took steps to ensure the
proper use of interagency contracts by DOD, the largest customer for
these types of contract arrangements. The act prohibits DOD from
procuring goods and services above the simplified acquisition threshold
(generally $100,000) through a contract entered into by an agency
outside DOD, unless the procurement is done in accordance with
procedures prescribed by DOD for reviewing and approving the use of
such contracts.[Footnote 8] The conference report accompanying the
legislation established expectations that:
* DOD's procedures will ensure that any fees paid by DOD to the
contracting agency are reasonable in relation to work actually
performed;
* the supplies or services are consistent with the appropriated funds
being used;
* the goods and services procured are within the scope of the non-DOD
contract vehicle; and:
* such orders are in compliance with all applicable DOD-unique
statutes, regulations, directives, and other requirements prior to
approval.
Further, the act required reviews of certain non-DOD contracting
offices to determine if they are compliant with Defense procurement
requirements. [Footnote 9] If an office is deemed non-compliant, DOD
could be prohibited from ordering, purchasing or otherwise procuring
property or services in excess of $100,000 through that contracting
office. In addition, a recent change to the Federal Acquisition
Regulation (FAR), effective July 2004, added language to make it clear
that a contracting officer placing an order against a GSA Schedule on
another agency's behalf is responsible for applying that agency's
regulatory and statutory requirements.[Footnote 10]
Breakdowns Occurred When Interior Procured Interrogation and Other
Services for DOD:
The process of procuring interrogation and other services for DOD broke
down at numerous points. In general, breakdowns in the procurement
process, such as not following competition requirements and not
properly justifying the decision to use interagency contracting,
occurred when the orders were issued. The process also broke down
during the administration of the contract, as the contractor's
performance was not adequately monitored. Because the officials at
Interior and the Army responsible for the orders did not fully carry
out their roles and responsibilities, the contractor was allowed to
play a role in the procurement process normally performed by the
government. This situation increased the risk that the government would
not get the services it needed at reasonable prices and in compliance
with competition and other contracting requirements.
Task Orders Were Out of Scope of Underlying Contract:
Orders issued outside the scope of the underlying contract do not
satisfy legal requirements under the Competition in Contracting Act for
competing the award of government contracts.[Footnote 11] In such
cases, the out-of-scope work should have been awarded using competitive
procedures or supported with a justification and approval for other
than full and open competition. The Interior IG and GSA have determined
that 10 of the 11 task orders issued by Interior to CACI for
interrogation and other services in Iraq were outside the scope of the
underlying GSA information technology contract.[Footnote 12] The Army
has also determined that interrogation services were outside the scope
of the contract.
The labor category descriptions in the GSA contract were, in most
cases, significantly different from the descriptions on DOD's
statements of work and do not accurately represent the work that the
contractor performed. Table 1 demonstrates some of the disparities
between the labor categories in DOD's statements of work and the
information technology contract.
Table 1: Comparison of Labor Categories from DOD's Statements of Work
to the Information Technology Contract:
Statements of work: Screening/Interrogation Operations Coordinator;
Information technology contract: Senior System Engineer.
Statements of work: Senior Counterintelligence Agent;
Information technology contract: Senior Analyst.
Statements of work: Counterintelligence Agent;
Information technology contract: Senior Functional Analyst.
Statements of work: Screener;
Information technology contract: Training Specialist.
Statements of work: Interrogator;
Information technology contract: Senior Functional Analyst.
Statements of work: Tactical/Strategic Interrogator;
Information technology contract: Senior System Planner.
Source: GAO analysis of Interior's task order files.
[End of table]
CACI representatives stated that they determined the salary and
benefits the company would pay interrogators and screeners and then
selected the GSA information technology contract labor categories that
would sufficiently cover the company's employee salary and benefits
expenses, overhead, and profit. In other words, CACI selected the labor
categories in the contract for cost and pricing purposes, rather than
as a reflection of the work to be performed. Army representatives in
Iraq told us that the services on the orders for interrogators,
screeners, and logistics support were not information technology
services. The Interior contracting officer also had concerns about
whether the orders were within scope, asking the contractor for a
verbal and, later, written explanation as to how the labor categories
in the contract were related to the services the company was to provide
in Iraq.
The contracting officer neglected to follow a requirement for legal
review that could have raised questions about whether the orders were
within scope. A July 2001 Interior policy requires legal review for all
proposed solicitations in excess of $500,000 for non-commercial items
and $2 million for commercial items. Interior contracting officials
stated that they did not believe this requirement extended to orders
placed on GSA contracts. Representatives from Interior's offices of
general counsel and acquisition policy, however, told us that orders
placed on GSA contracts are subject to legal review and that the orders
for interrogation and other services should have been reviewed.
Further, the Interior contracting officer did not perform the required
evaluation of the contractor's proposed approach for addressing DOD's
requirements. Normally, when ordering services from GSA Schedules that
require a statement of work, the ordering office is responsible for
evaluating the contractor's level of effort and mix of labor proposed
to perform the specific tasks being ordered and for making a
determination that the price is reasonable. In this situation, however,
the Interior contracting officer did not evaluate the mix of labor
categories or establish that the level of effort was reasonable.
Although documents in Interior's contract files provided that
"technical review does not take exception to the proposal," no
documentation exists to support the statement that an evaluation was
performed and, in fact, Interior contracting officials told us that no
such review was done.
DOD Task Order Competition Requirements Were Not Followed:
In addition to violating competition rules by placing orders that were
not in the scope of the underlying contract, Interior contracting
officials also did not comply with requirements contained in section
803 of the National Defense Authorization Act for Fiscal Year 2002
relating to DOD's purchase of services from GSA Schedule
contracts.[Footnote 13] Specifically, for DOD orders for services over
$100,000 placed on GSA contracts, notice must be provided to all GSA
Schedule contractors offering the required services or to as many
contractors as practicable to ensure that offers will be received from
at least three contractors. If three offers are not received, a written
determination must be made that no additional contractors could be
identified despite reasonable attempts to do so. The requirements that
DOD orders be placed on a competitive basis can be waived in writing
for certain circumstances such as urgency. Section 803 requirements
applied to the Iraq orders, even though Interior was the contracting
agency, because DOD regulations require application of section 803
provisions to orders placed by non-DOD agencies on behalf of
DOD.[Footnote 14] The Interior contracting office, however, placed the
orders directly with CACI without notifying other prospective
contractors. Interior did not make any written determination that no
additional contractors could be identified or that the competition
requirement should be waived in this case.
Decision to Use Interagency Contracting Was Not Properly Justified:
In contracting through Interior, the Army did not follow requirements
to justify use of interagency contracts. According to procurement
regulations, an Economy Act determination and findings should have been
approved by an Army contracting officer or another designated official
to justify the use of Interior to acquire the services for the
Army.[Footnote 15] The Economy Act authorizes agencies to enter into
mutual agreements to obtain supplies or services by interagency
acquisition.[Footnote 16] The FAR mandates that the requiring activity
document that an Economy Act order is in the agency's best interest and
that it cannot obtain the goods and services as conveniently or
economically by contracting directly with a private source. However,
Army personnel did not prepare the determination and findings, as
required.[Footnote 17]
Ordering Procedures Meant to Ensure Best Value Were Not Followed:
Interior placed the orders with CACI by using a blanket purchase
agreement (BPA) established under the GSA Information Technology
Schedule contract in 1998.[Footnote 18] BPAs, a simplified method of
filling anticipated repetitive needs for supplies and services, allow
agencies to establish "charge accounts" with qualified vendors. The BPA
in this case was improperly established and improperly used. Interior's
contracting office did not comply with required BPA procedures meant to
ensure the government receives the best value for its dollars and that
competition is encouraged. Under procedures referred to in the Schedule
contract, ordering offices that establish a single BPA are required to
select a contractor that represents the best value and results in
lowest overall cost, and to inform other contractors of the basis for
the selection. We found no evidence, either in the BPA files or in our
discussions with Interior contracting staff, that these requirements
were followed, even though documents in the contract files state that
the BPA is "best value." In essence, the BPA was used to direct
business to the company on a sole source basis.
Contracting officials also failed to seek discounts from CACI's
established GSA contract prices, as required. Applicable procedures in
the contract stipulate, for example, that discounts are to be sought
when orders exceed $500,000.[Footnote 19] We found that no discounts
were sought, even though the value of the orders for work in Iraq
ranged from $953,000 to $21.8 million. In addition, the procedures in
the GSA contract require that BPAs are reviewed annually to ensure the
government continues to receive best value. These annual reviews were
never conducted. Further, the BPA was improper because it did not
contain defined requirements, as stipulated in the GSA contract.
Rather, the BPA states that "the categories of service provided by this
BPA may include but are not limited to" various classes of information
technology services. Finally, in 2001, Interior added several items and
services to the BPA. This action improperly expanded the scope of
services contained in the underlying GSA contract. According to GSA
guidance, such scope expansions are a potential violation of the
Competition in Contracting Act. When we asked Interior's contracting
officials--including the contracting officer who signed the BPA--about
these additions, they were unable to explain how or why the additions
had been made.
Contractor's Performance Was Not Adequately Monitored:
One of the contracting officer's key responsibilities is ensuring that
the government monitors the contractor's performance. The contracting
officer may assign this responsibility to a contracting officer's
representative (COR). At Interior, the contracting officer is required
to verify that the COR has the appropriate training and to issue a
designation letter to the COR outlining the duties to be performed.
These duties can include:
* verifying that the contractor performs the technical requirements of
the contract in accordance with the contract terms, conditions, and
specifications;
* monitoring the contractor's performance, notifying the contractor of
deficiencies observed during surveillance, and directing appropriate
action to effect correction; and:
* reporting to the contracting officer in a monthly report the
performance of services rendered under the contract.
We found that Interior's contracting officials never verified that the
Army personnel serving as CORs had the appropriate training and, with
one exception, sent the COR designation letter either months after the
fact or not at all. Interior officials, including the contracting
officer who placed the orders for DOD, had no explanation for why
contractor surveillance policies were not followed. Moreover, the
contracting officer had little to no communication with the CORs in
Iraq and did not follow up to obtain monthly reports from them on the
contractor's performance.
Proper surveillance of the contractor's performance under the orders
was especially critical because the work was done on a time and
materials basis, where services are billed on the basis of direct labor
hours at specified fixed hourly rates (which includes wages, overhead,
general and administrative expenses, and profit). According to the FAR,
time and materials contracts require appropriate government oversight
because there is no incentive for the contractor to control costs or be
efficient.[Footnote 20] This requirement was recently reiterated in a
September 2004 memo from DOD's Director, Defense Procurement and
Acquisition Policy, which states that, because labor hour and time and
materials contracts usually require significant surveillance to ensure
the government receives good value, CORs should be appointed to verify
the appropriateness of labor categories and the reasonableness of the
number of hours worked.
In Iraq, the Army CORs responsible for the orders for interrogation and
other services performed limited surveillance of the contractor's
performance. Contractor employees were stationed in various locations
around Iraq, with no COR or assigned representative on site to monitor
their work. One contractor interrogator who had been located at the Abu
Ghraib prison told us that, although he interacted with military
personnel at the prison, he had no interaction with the COR. Further,
although the COR in Baghdad stated that he relied on other military
personnel on site to report back to him, a recent Army investigative
report showed that the military personnel on site were not given
guidance on how to oversee the contractors. In fact, one of the
military interrogators at Abu Ghraib prison indicated that the primary
point of contact for the contractors was the contractor's on-site
manager, with no mention of the COR. The Army investigative report
pointed to this lack of contractor surveillance at the Abu Ghraib
prison as a contributing factor to the environment in which the
prisoner abuse occurred. The report noted that it is very difficult, if
not impossible, to effectively administer a contract when the COR is
not on site and that the Army needs to improve its oversight of
contractors' performance to ensure that the Army's interests are
protected.
Contractor Played a Role in the Procurement Process Normally Performed
by Government Personnel:
In procuring the interrogation and other services in Iraq, Interior and
Army officials abdicated their contracting responsibilities to a large
degree. In this void, the contractor played a significant role in
developing, issuing, and administering the orders, including:
* developing requirements;
* identifying the contractor's BPA with Interior as the contract
vehicle to provide the services;
* drafting statements of work;
* suggesting that Army officials use the company's rough order of
magnitude price as the government cost estimate;
* acting as a conduit for information from the Army in Iraq to the
Interior contracting office;
* providing the Interior contracting office with a draft justification
and approval to award additional work to the company on a sole source
basis;
* sending invoices directly for payment; and:
* requesting that construction work be performed under the BPA, which
would have also been out of scope from the GSA Schedule contract,
although subsequent discussions between CACI and Interior contracting
officials resulted in the work being awarded separately on a sole
source basis due to urgency.
By acting in this manner, the contractor effectively replaced
government decision-makers in several aspects of the procurement
process. For example, a contractor employee proposed the initial
requirements package for human intelligence, which included
interrogators, and provided information to the Army personnel regarding
skill sets needed for positions. Contractor employees also identified
the company's BPA with Interior as the contract vehicle to provide the
services. Contractor officials acknowledge they helped to draft
statements of work, with contractor employees in Iraq sending the
statements of work to company headquarters in the United States for
suggestions. In fact, one of the statements of work we found in
official contract files was on the contractor's letterhead. We also
found that contractor employees wrote a draft justification and
approval for Interior to award additional work noncompetitively to the
company. Such a level of participation by the contractor creates a
conflict of interest and undermines the integrity of the competitive
contracting process.
Contractor officials explained that they marketed their services
directly to Army intelligence and logistics officials in Iraq because
of relationships they had developed over time. According to contractor
officials, Army officials told them to work directly with the Interior
contracting office because the DOD contingency contracting office in
Iraq was focused on obtaining other necessary services. They also told
us that, because military communication channels were not adequate,
they communicated directly with the Interior contracting office.
Interior contracting officials went along with this arrangement, citing
problems in reaching Army officials in Iraq. The contract files contain
emails between the contractor and Interior contracting officials on
matters such as funding requests, statements of work, and COR
assignments. Further, a COR responsible for the logistics orders told
us that contractor officials informed him that Interior had merged two
task orders; he was unaware that this had occurred. According to
contractor officials, because Army and Interior officials allowed
contractor personnel to act as the go-between, the contractor sent its
invoices directly to Interior for payment after the COR signed them, as
opposed to the normal practice of having government personnel perform
this task.
Need for Strong Management Controls:
Although use of streamlined contracting vehicles can be beneficial,
they must be effectively managed to ensure compliance with the FAR and
to protect the government's interests. When a requiring agency's
contracting needs are being handled by an outside agency, effective
management controls become even more critical due to the more complex
environment involved. Management controls, synonymous with internal
controls, are an integral component of an organization's management
that provide reasonable assurance that operations are effective and
efficient and that employees comply with applicable laws and
regulations. Two controls include management oversight and training.
When these controls are not in place, particularly in a fee-for-service
environment, more emphasis can be placed on customer satisfaction and
revenue generation than on compliance with sound contracting policy and
required procedures. We found an absence of these management controls
for the 11 orders that were issued and administered for interrogation
and other services.
Lack of Management Oversight:
Significant problems in the way Interior's contracting office carried
out its responsibilities in issuing these orders were not detected or
addressed by management. Further, managers at this office told us that
they intentionally created an office culture of providing inexperienced
staff with the opportunity to learn contracting by taking on
significant responsibilities. More experienced contracting officers
were responsible for overseeing and reviewing less experienced and
trained purchasing agents and contract specialists. However, some staff
told us that the contracting officers' reviews were not always thorough
and appeared to be a "rubber stamp." Further, some staff indicated
discomfort at the level of responsibility given to less experienced
personnel and believed oversight of the activities of these employees
was inadequate.
Moreover, Interior's headquarters did not exercise thorough oversight
of the contracting activity that placed the orders. An April 2003
Interior Acquisition Management Review concluded that the contracting
office was highly effective, despite the fact that the review
identified a number of problems where contracting personnel did not
comply with sound contracting practices. Nonetheless, an Interior
headquarters official told us that the contracting office did not
require extensive oversight, based in part on the determination that
the office was highly effective. The review cited the following:
* A conscious decision was made not to comply with Interior's
requirements for legal review because the office believed the reviews
took too long.[Footnote 21]
* A general weakness in cost support was noted. For instance, "best
value" analysis was cited in sole source awards.[Footnote 22] Also, the
contracting office accepted contractors' proposed prices without
analyzing the cost and pricing data in depth to ensure that the prices
were fair and reasonable. Further, the contractor's proposed cost and
the government's cost estimate were identical without any explanation.
* Labor rates included in contracts and orders were not adequately
justified.
* Competition requirements were not followed when placing orders using
BPAs.
The review's conclusion that the office was highly effective was based
in part on the office's peer review process, where contracting actions
were reviewed by a second person as a management control. However, the
review found no consistent methodology or format for the peer reviews
and little or no information on results. Rather, the process for
conducting and reporting the results of the reviews varied from
individual to individual. Based on our interviews with Interior
employees, we found that the peer reviews were often conducted by
personnel with little contracting experience and training.
Adequate management oversight is particularly critical to ensuring that
interagency fee-for-service contracting organizations, such as the
Interior contracting office, comply with procurement regulations. The
fee-for-service arrangement creates an incentive to increase sales
volume in order to support other programs of the agency that awards and
administers an interagency contract. This may lead to an inordinate
focus on meeting customer demands at the expense of complying with
required ordering procedures. The managers at Interior's contracting
office promote a business-like entrepreneurial philosophy modeled after
the private sector and empower employees to market services, interact
with contractors, and make decisions in support of acquisitions. We
found examples where the Interior contracting office marketed its BPA
with CACI to federal agencies as a way to obtain services quickly
without competition. Further, the performance measures for individual
employees at Interior's contracting office, which measure quality,
teamwork, and customer service, specifically state that customer
satisfaction is a high priority in achieving good customer service. In
fact, Interior's Acquisition Management Review of the contracting
office focused heavily on customer satisfaction as a performance
metric. Several of the office's customers were interviewed, and their
compliments were summarized in detail as a key section of the review.
The Army also lacked management oversight of the contracting activity
for interrogation and other services. This lack of oversight is
evidenced by some questions that were raised by the Army's Chief of
Contracts in Iraq in February 2004, about 6 months after the initial
orders were placed. The Chief of Contracts asked the Interior
contracting office:
* whether the orders were against a GSA contract and what the contract
number was,
* what labor rates were included in the contract,
* whether there was a performance description for contractor personnel
providing services,
* whether all contractor employees in Iraq were in accordance with the
statements of work,
* who had been keeping track of the labor hours the contractor billed
to the government,
* whether Interior had received monthly status reports on the
contractor's performance, and:
* whether an Economy Act determination and findings had been prepared.
Further, DOD is required to have a management structure in place for
the procurement of services that provides for a designated official in
each military department and defense agency to exercise responsibility
for the management of the procurement of services by that department or
agency.[Footnote 23] This management structure is to include a means by
which employees of the departments and defense agencies are accountable
to the designated officials for carrying out certain requirements.
These requirements include ensuring that services are procured by means
of contracts or task orders that are in the best interest of DOD and
are entered into or issued and managed in compliance with applicable
statutes, regulations, directives, and other requirements, regardless
of whether the services are procured by DOD directly or through a non-
DOD contract or task order. These requirements also include approving,
in advance, any procurement of services above certain thresholds that
is to be made through the use of a contract entered into, or a task
order issued, by a government official outside DOD. Notwithstanding the
requirement for this management structure, it is clear that DOD's
implementation did not ensure that these requirements were met in
procuring the interrogation and other services through Interior.
Lack of Adequate Training:
Interior's contracting office personnel and Army personnel in Iraq that
were responsible for the orders for interrogation and other services
lacked adequate training on their contracting responsibilities. While a
warranted contracting officer at Interior signed the orders, certain
requirements were not understood or followed, such as the need for
legal review and competition. Further, an inexperienced purchasing
agent administered the BPA on a day-to-day basis, including preparing
various contracting documents. The employee had taken only one basic
contracting course, even though the contracting office's training
requirements require purchasing agents to take three contracting
courses. Moreover, one staff member who had not taken the required
training for a purchasing agent position was promoted to a contract
specialist position. Several contracting employees we spoke with were
concerned about the frequency and consistency of training they had
received. We found that employees took training on their own initiative
and that the training was not monitored or enforced by managers.
Army personnel in Iraq responsible for overseeing CACI employees'
performance in Iraq were not adequately trained to properly exercise
their responsibilities. An Army investigative report concluded that the
lack of training for the CORs assigned to monitor contractor
performance at Abu Ghraib prison, as well as an inadequate number of
assigned CORs, put the Army at risk of being unable to control poor
performance or become aware of possible misconduct by contractor
personnel. We found that the personnel acting as CORs did not, for the
most part, have the requisite training and were unaware of the scope of
their duties and responsibilities. For example, they did not know that
they were required to monitor and verify the hours worked by the
contractor and instead just signed off on the invoices provided by the
contractor. During the course of our work, we found confusion about
whether the CORs were required to meet Interior's or DOD's training
requirements. DOD and Interior officials told us that no policy or
guidance exists on this matter when interagency contracting is used.
One COR for the logistics orders in Iraq, who had prior contracting
experience, observed problems with two orders as soon as he was
designated COR in February 2004. The concerns included: (1) a "clear
mismatch" between the underlying contract and the statement of work,
(2) the fact that no invoices had been submitted for work that began
several months earlier, (3) Army personnel not overseeing and verifying
time cards, (4) significant delays and issues in communicating with
Interior's contracting office, and (5) significant problems with the
administration of the orders by both the government and the contractor.
Too Early to Tell If Actions to Increase Oversight and Improve Training
Will Be Effective:
The discovery of the problems with the Iraq orders encouraged Interior
and DOD to take corrective actions aimed at improving management
oversight and training, particularly as they pertain to interagency
contracting. However, due to the recent nature of these efforts, it is
too soon to tell how effective they will be.
In June 2004, Interior issued a policy memorandum prohibiting its
contracting officers from acquiring interrogation or human intelligence
services "regardless of the dollar value" for internal or external
customers. Further, to focus attention on proper use of GSA contracts,
Interior plans to evaluate its use of GSA contracts in its fiscal year
2006 agencywide targeted performance review, an annual self-reported
review by each of its contracting activities focusing on issues that
are deemed important by top executives.
Also in June 2004, Interior's National Business Center, which has
direct oversight responsibility for the contracting office that placed
the orders for DOD in Iraq, clarified for its contracting activities
the requirements for competition when ordering on behalf of DOD. At the
same time, it updated its policy outlining COR requirements,
emphasizing the need for written designation letters; issued new
guidance for using BPAs and GSA contracts; and clarified its legal
review policy. Moreover, the National Business Center intends to hire
an additional manager whose responsibilities will include overseeing
the contracting activities under the Center's purview. Officials at
Interior agree that management controls are critical in fee-for-service
contracting offices with a focus on customer service, and, in comments
on this report, Interior stated that the National Business Center has
established a new performance rating system that provides incentives to
contracting officials to exercise due diligence.
Officials at the Interior contracting office that ordered the services
for the Army told us that they are no longer placing orders against the
CACI BPA. Once all orders expire, the BPA will be terminated. In
addition, in December 2004, the contracting office released a revised
independent quality review process to include specific checks for GSA
contract actions, including whether the maximum order threshold is
exceeded, section 803 competition compliance, and scope determination
with a labor category verification. Officials also plan to review the
amount of activity on all existing BPAs to determine if these BPAs are
still needed and to assess whether prices are competitive. Interior, in
commenting on this report, stated that the contracting office has also
established a policy to ensure that BPAs are reviewed annually.
In addition, Interior has taken steps to improve training for its
contracting officers. For fiscal year 2005, Interior has required each
of its contracting activities to certify that all warranted contracting
officers have taken two training courses on GSA contract use. Further,
the contracting office that placed the orders for the Army has re-
instituted regular, formal training seminars for newer contracting
staff. It has also implemented a new mentoring program to augment
training standards and assist new employees in learning on the job.
However, a mechanism is not yet in place to track or monitor the
training.
DOD, for its part, issued a policy in October 2004, signed by high-
level officials from the Office of the Comptroller and the Office of
Acquisition, Technology, and Logistics, requiring that military
departments and defense agencies establish procedures for reviewing and
approving the use of other agencies' contracts. The procedures are to
ensure that the use of another agency's contract is in the best
interest of DOD; tasks are within the scope of the contract being used;
funding is being used in accordance with appropriation limitations;
unique terms and conditions are provided to the ordering activity; and
data are collected on the use of outside ordering activities. The
procedures took effect in January 2005. Most military services have
outlined procedures where the requiring activity is responsible for
coordinating with the contracting office, and in some cases the legal
and financial offices, when planning to use interagency contracting and
for documenting compliance with the policy's guidelines. While the
policy does not include a mechanism for monitoring the departments'
implementation plans, ensuring ongoing compliance with the policy, or
sharing information across DOD, agency officials stated that these
functions are being performed informally.
Recommendations for Executive Action:
While the actions Interior and DOD have recently put in place or plan
to initiate are positive steps, additional actions are needed to
further refine these efforts. Accordingly, we recommend that:
The Secretary of the Interior take the following four actions:
* Ensure that management reviews of Interior contracting offices
emphasize and assess whether contracting officials are trained
adequately and BPAs are used appropriately.
* Ensure that performance measures for contracting officials provide
incentives to exercise due diligence and comply with applicable
contracting rules and regulations.
* Ensure that CORs are properly designated when contracts are awarded
or orders are issued for other agencies and that they have met
appropriate training requirements.
* Direct the National Business Center at Fort Huachuca to take the
following three actions:
* Establish a consistent methodology for conducting peer reviews of
contracting actions and ensure that experienced and trained contracting
officials perform the reviews.
* Ensure that reviews of BPAs are done annually, as required by the
FAR, to determine whether they still represent best value.
* Ensure that the contracting staff are properly trained and effective
mechanisms are in place to track the training.
The Secretary of Defense take the following action:
* Develop a mechanism to track implementation of the new policy that
establishes procedures for reviewing and approving the use of non-DOD
contracts and to ensure that the military services and defense agencies
have the opportunity to share information on how they are implementing
it.
Agency Comments and Our Evaluation:
We provided a draft of this report to DOD, Interior, and CACI for
review and comment. Their written comments are included as appendices
II, III, and IV, respectively.
DOD agreed with our recommendation to develop a mechanism to track
implementation of the new policy that establishes procedures for
reviewing and approving the use of non-DOD contracts. DOD plans to post
implementation policies on its web site and is considering establishing
a community of practice on this issue. Our draft report contained a
second recommendation to ensure that CORs are properly assigned, as
appropriate, for all orders that DOD places on interagency contracts
and that they are provided requisite training. Because DOD recently
concurred with a similar recommendation in another GAO report,[Footnote
24] we have deleted this recommendation.
Interior agreed with all of our recommendations and outlined actions
and plans to address the issues that we identified in our
report.[Footnote 25] In general, Interior is taking actions to improve
oversight and training for its contracting staff, in particular for the
National Business Center offices. In some cases, officials initiated
corrective actions during the course of our review, as we brought
issues to their attention.
While acknowledging that our report identified a number of areas where
the government can improve its contracting processes, CACI took issue
with several aspects of the report:
CACI suggested that our report does not adequately take into account
the impact of the wartime environment in Iraq. We believe that our
report adequately references the wartime situation. As CACI pointed
out, the wartime circumstances may have justified the government's use
of non-competitive contracting procedures. However, such authorized
flexibilities were not employed by the agencies involved. Instead, as
described in the report, Interior improperly used CACI's GSA contract
in servicing its DOD customer.
CACI offered a number of detailed comments to support its position that
the orders fell within the scope of the GSA contract. We did not find
these arguments convincing. Every government agency involved determined
that most of the work performed on the orders was out of scope.
Contrary to CACI's assertion, our finding was not based merely on a
comparison of the labor categories in CACI's GSA contract and those in
the orders' statements of work, but on the material differences between
the services authorized by the GSA contract and the services actually
ordered by Interior and provided by CACI. While some of the services
involved information technology, that, by itself, does not mean that
those services (such as interrogation of detainees) can be ordered from
CACI's GSA contract. The GSA contract is for the performance of certain
commercial-type information technology services, not for any service
that happens to involve the use of information technology. As noted in
our report, the Army officials we spoke with stated that the services
were not information technology services. In addition, while CACI's
earlier orders from GSA's Federal Technology Service may help explain
how the services in Iraq came to be ordered by Interior, it is not
determinative of the proper use of that contract in this situation.
On the issue of the contractor playing an unusually large role in
actions normally performed by government officials, CACI defends its
actions as being appropriate in the wartime environment. The intent of
that section of our report is not to suggest that the contractor acted
with malfeasance; rather, we highlight the fact that, because the
government officials did not exercise due diligence in carrying out
their duties, the contractor was either allowed or encouraged to step
in to fill the void. Further, CACI refers to our description of out-of-
scope construction work and the drafting of the sole source
justification as "incomplete and out of context." Based on our audit
work with Interior and CACI officials, we found that CACI intended to
include the construction work on the order for intelligence services
under the BPA. However, because subsequent decisions by CACI
contracting personnel and Interior's contracting office led to a
separate, sole source award, we revised the wording in our report to
reflect this outcome. The contractor did--as CACI's response confirms-
-draft a sole source justification for additional construction work. As
stated above, we included this in our report to demonstrate how the
contractor was encouraged to perform duties normally fulfilled by
government personnel.
CACI questioned whether our findings on the lack of adequate contractor
surveillance were well-founded. Our findings are not based solely on
our discussion with the contractor interrogator who had been located at
Abu Ghraib prison; rather, they are based on our file reviews and a
number of discussions with DOD officials.
We are sending copies of this report to the Director, Office of
Management and Budget, the Secretaries of Defense and the Interior, and
CACI. We will make copies available to others on request. In addition,
this report will be available at no charge on GAO's Web site at
http://www.gao.gov.
If you have any questions about this report, please contact me on (202)
512-4841 or Michele Mackin on (202) 512-4309. Other major contributors
to this report were Alexandra Dew, James Kim, Adam Vodraska, and
Tatiana Winger.
Signed by:
David E. Cooper,
Director, Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
We conducted our work at the Department of the Interior, including its
National Business Center headquarters and office at Fort Huachuca,
Arizona; and the Department of Defense (DOD), including the Defense
Procurement and Acquisition Policy office and the Department of the
Army. We also met with representatives of CACI, International, Inc.
(CACI) and the General Services Administration (GSA).
To determine what breakdowns occurred in the process of procuring
interrogation and other services and the contributing factors to the
breakdowns, we reviewed contract files on the 11 orders issued to CACI
to understand the facts about how the orders were issued. We also
reviewed internal controls and guidance to assess what safeguards were
in place to ensure compliance with regulations, including training
requirements and performance evaluation factors at the National
Business Center's office in Fort Huachuca. We reviewed the two orders
for interrogators, placed in August and December 2003, to corroborate
GSA's and Interior's determination that the orders were out of the
scope of the GSA contract. We also identified and analyzed pertinent
policies and regulatory requirements governing the contracting process
to assess whether Interior, Army, and contractor officials operated in
compliance with those requirements. We interviewed Army representatives
who were responsible for overseeing the contractor's performance in
Iraq. We spoke with officials at the Interior's Offices of Acquisition
and Property Management, National Business Center, and employees of the
Fort Huachuca office who were involved with the orders for
interrogation and other services. Additionally, we interviewed several
CACI employees, including a contractor interrogator, and attorneys
representing CACI. We used GAO's Standards for Internal Control in the
Federal Government (GAO/AIMD-00-21.3.1, November 1999) as criteria to
demonstrate the importance of management controls such as oversight and
training.
To evaluate the extent to which actions taken by Interior and DOD
address contributing factors to breakdowns in the procurement process,
we identified and reviewed steps taken by these agencies, such as newly
released policies and guidance. In particular, we reviewed recently
issued policies from Interior's headquarters, National Business Center,
and the contracting office at Fort Huachuca, as well as DOD.
We conducted our review from July 2004 to January 2005 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Comments from the Department of Defense:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
ACQUISITION TECHNOLOGY AND LOGISTICS:
3000 DEFENSE PENTAGON:
WASHINGTON, DC 20301-3000:
APR 13 2005:
Mr. David E. Cooper:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G. Street, NW:
Washington, DC 20548:
Dear Mr. Cooper:
This is the Department of Defense (DoD) response to the GAO draft
report, INTERAGENCY CONTRACTING: Problems with DoD's and Interior's
Orders to Support Military Operations, dated March 9, 2005, (GAO Code
120371/GAO-05-201). Our comments on the report are enclosed.
We are currently collaborating with the Department of the Interior
(DOI) to ensure that the issues identified in the report are
effectively addressed and resolved. Earlier this year we initiated
reviews of civilian agencies that provide contracting support to DoD.
The National Business Center and "Gov Works," the two DOI providers of
contracting services for DoD, volunteered to be one of the first
organizations to participate in the DoD review. A representative from
Defense Procurement and Acquisition policy visited each site to
initiate the review process. While the reviews are still ongoing our
collaborative effort and open communication at the most senior levels
should ensure our future success.
Thank you for the opportunity to review and comment on the subject
draft report. For further questions concerning this report, please
contact Mike Canales, on 703-695-8571 or via e-mail at Michael.
Canales@osd.mil.
Sincerely,
Signed by:
Deidre A. Lee:
Director, Defense Procurement and Acquisition Policy:
Enclosure: As stated:
GAO DRAFT REPORT-DATED MARCH 9, 2005 GAO CODE 120371/GAO-05-201:
"INTERAGENCY CONTRACTING: PROBLEMS WITH DOD'S AND INTERIORS ORDERS TO
SUPPORT MILITARY OPERATIONS'
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
develop a mechanism to track implementation of the new policy that
establishes procedures for reviewing and approving the use of non-DoD
contracts and to ensure that the military services and defense agencies
have the opportunity to share information on how they are implementing
it. (p.21/GAO Draft Report):
RESPONSE: Concur. The Director, Defense Procurement and Acquisition
Policy, will post all implementation policies of the Military
Department and Defense Agencies on the website, http://www.acq.osd.mil/
dpap/specificpolicy/index.htm, established for the policy on the
"Proper Use of Non-DoD Contracts." In addition, we are exploring the
feasibility of establishing a community of practice through the Defense
Acquisition University on this same policy.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
ensure that Contracting Officer's Representatives (CORs) are assigned,
as appropriate, for all orders that DoD places on interagency contracts
and that they are provided requisite training for performing their
duties and responsibilities.
(p. 21/GAO Draft Report):
RESPONSE: Partially concur. Consistent with the DoD response to GAO-05-
274, "Contract Management: Opportunities to Improve Surveillance on
Department of Defense Services Contracts," we will require that
properly trained contracting officer representatives must be appointed
for all contracts for services including those awarded by other federal
agencies. DoD will modify DFARS to require that, unless a waiver is
approved in writing, contracting officers must appoint a properly
trained contracting officer representative (COR) in writing before
performance commences on any contract action for services awarded by a
DoD component or by another federal agency on behalf of DoD. We do not
agree that a COR be appointed for all orders for supplies because most
orders for supplies clearly define the deliverables and don't require
as much oversight during contract performance as contracts for
services. The appointment of a COR on orders for supplies will be
discretionary.
[End of section]
Appendix III: Comments from the Department of the Interior:
United States Department of the Interior:
OFFICE OF THE ASSISTANT SECRETARY:
POLICY, MANAGEMENT AND BUDGET:
Washington, DC 20240:
APR 08 2005:
Mr. David E. Cooper:
Director, Acquisition and Sourcing Management:
U. S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Cooper:
Thank you for giving us the opportunity to review and comment on the
draft report entitled "Interagency Contracting: Problems with DOD's and
Interior's Orders to Support Military Operations." We concur with the
recommendations contained in the report and have made notable strides
in improving our acquisition operations to date. The report's
recommendations, as well as a previous report by Interior's Inspector
General, helped us focus on necessary corrective actions so the
deficiencies identified in the report do not recur in the future.
We are currently collaborating with the Department of Defense (DOD) to
ensure that the issues raised in the report are effectively addressed
and resolved. For example, a provision in the FY 2005 National Defense
Authorization Act (NDAA) requires review of certain non-DOD contracting
offices to determine if they are compliant with Defense procurement
requirements. In early 2005, DOD initiated reviews of civilian agency
contracting offices providing contracting support to DOD customers. The
National Business Center (NBC), as one of two Department of the
Interior (DOI) providers of contract services for DOD, volunteered to
be one of the first organizations to participate in the DOD reviews. A
representative from the Office of the Secretary of Defense visited
NBC's acquisition office at Fort Huachuca on March 8-10, 2005, to
initiate the review process. This review is currently on-going.
Further, as evidence of both parties' commitment to compliance with
this new Act, NBC and DOD are establishing a Memorandum of Agreement
delineating the responsibilities and expectations of both parties when
the NBC provides contracting services to DOD clients.
We also appreciate GAO's willingness to incorporate DOI comments
provided during the audit exit briefing on December 15, 2004. As a
result, we believe the draft report is a more accurate presentation of
the issues. However, there are still a few comments in the body of the
draft report which give us concern. All of these concerns, except one,
are addressed in Enclosure 1.
Page Two:
Enclosure 2 contains a description of actions completed and actions
remaining to be completed. We are working very closely with DOD to
aggressively implement all recommendations of the report to ensure full
compliance with all existing rules and regulations when providing
contracting support. The end result will be an acquisition function
that adheres to policy and procedures while providing effective,
efficient, and mission-critical acquisition support.
Mr. John Nyce, Assistant Director for Administrative Operations, NBC,
is available at 202-208-3932 to answer any questions your staff may
have regarding this issue.
Sincerely,
Signed for:
P. Lynn Scarlett:
Assistant Secretary for Policy, Management, and Budget:
Enclosures (2):
cc: Douglas J. Bourgeois, Director, NBC:
Debra E. Sonderman, Director, Office of Acquisition and Property
Management:
John Nyce, Assistant Director for Administrative Operations, NBC:
Response to Audit Recommendations:
Recommendation 1: Ensure that management reviews of Interior
contracting offices emphasize and assess whether contracting officials
are trained adequately and BPAs are used appropriately.
Response: Concur:
Departmental Action:
Existing management control guidance/checklists used by DOI bureaus in
the course of management reviews assess whether Interior contracting
officials are trained adequately and BPA's are used appropriately. (See
checklists at the following Office of Acquisition and Property
Management Internet site: http://www.doi.gov/pam/acgqual.html). The FY
2005 DOI Management Control Review mandates that all warranted GS-1102
Contract Specialists and GS-1105 Purchasing Agents, Department-wide,
complete two training courses: (1) Using GSA Schedules-Customers
(Online) and (2) Using GSA Schedules-Customers (FAR 8.4 Revisions).
The FY 2006 DOI Management Control Review reporting cycle will, at
minimum, mandate that: (1) all remaining warranted personnel (i.e.,
those not in the GS-1102 or GS-1105 series) and non-warranted GS-1102
and GS-1105 complete the above referenced coursework; and (2) bureaus/
offices review and evaluate their BPA award, administration, and review
processes for compliance with FAR requirements.
NBC Action:
Actions Completed:
* NBC developed management review criteria tailored specifically to
assess the process and procedures being utilized at the four NBC
Acquisition Offices when issuing orders under GSA schedules or under
internally created BPA/IDIQ contracting instruments. Review criteria
also assesses whether files contain proper documentation and that
contracting personnel are following all applicable rules and
regulations.
* NBC established a local policy at Southwest Acquisition Office (Fort
Huachuca) on December 16, 2004 to ensure that reviews of BPA's are
accomplished annually.
* NBC developed management review schedules for all four NBC Acquisition
Offices. All reviews will be completed by June 30, 2005.
Action plans will be developed by each Office in accordance with the
results of each review.
* NBC collaborated with DOD to complete the first of the scheduled NBC
management reviews from March 8-10, 2005 at the Southwest Acquisition
Office. The results of the review are being finalized and an action
plan will be created based on these results.
* All NBC contracting officials at Ft. Huachuca and the majority of
contracting officials across the entire organization completed the two
day GSA-sponsored training course on the use of schedules.
On-going Actions:
* A review is currently being performed at the Southwest Branch on all
open BPA's to determine if appropriate to remain active. The review
will be completed by June 17, 2005.
* BPA policy is being developed to reinforce that the award,
administration and annual review requirements are being followed at all
sites. The policy will be completed and implemented by June 1'7, 2005.
* NBC will perform process reviews at all NBC Acquisition sites during
FYo6 as required by the DOI Acquisition Management Control Review
guidelines.
Recommendation 2: Ensure that performance measures for contracting
officials provide incentives to exercise due diligence and comply with
applicable rules and regulations.
Response: Concur:
Departmental Action:
The DOI acquisition and human resources policy, including the DOI
Contracting Officers Warrant Manual System, identifies incentives to
exercise due diligence and comply with applicable contracting rules and
regulations as well as disincentives for non-compliance, e.g., warrant
suspension and termination. The DOI Office of Acquisition and Property
Management (PAM) will issue policy to DOI bureaus and offices
reiterating the importance of including the exercise of due diligence
and compliance with applicable contracting rules and regulations as
performance measures in all reviews/assessments of contracting
activities. The policy will be completed by June 30, 2005.
NBC Action:
In accordance with Departmental guidance for FY 2005, NBC established a
new five-tier performance rating system for all employees. The
performance ratings established for contracting officials
specifically provide for incentives to exercise due diligence and to
assure compliance with applicable rules and regulations. The specific
performance element and fully successful criteria are listed below:
Critical Element 2-Quality Contract Execution and Administration.
1) Work with customers in developing proper acquisition strategies. 2)
Show sound business judgment in making various acquisition or business
decisions throughout the entire process.
3) Properly document files when awarding contracting actions. 4)
Demonstrate quality analysis and negotiate in good faith to achieve
mutually satisfactory resolution of issues.
Performance Standard-Fully Successful-Complies with federal
acquisition laws and regulations including the FAR, DIAR, DOI/PAM
policies, NBC policies and when applicable, external customer rules and
regulations. Achieves satisfactory rating on FY 2005 Acquisition
Management Review (AMR). Develops plan to correct any deficiencies
found in the AMR and demonstrates progress in implementing plan.
Recommendation 3: Ensure that COR's are properly designated when
contracts are awarded or orders are issued for other agencies and that
they have met appropriate training requirements.
Response: Concur:
Departmental Action:
The DOI Office of Acquisition and Property Management will issue policy
requiring that contracting activities that award or issue orders for
other agencies ensure that Contracting Officer Representatives (CORs)
are properly designated and meet appropriate training requirements. The
policy will be completed by June 30, 2005.
NBC Action:
* On June 4, 2004, the NBC Acquisition and Property Management (A&PMD)
Division Head issued the "Administrative Guidelines Relating to
Contracting Officer Representative (COR's or COTR's), Invoices, and
Performance Reporting" policy.
* This process is being reviewed as part of the FY 2005 AMR discussed
above.
Recommendation 4: Direct the NBC at Fort Huachuca take the following
three actions:
(a) Establish a consistent methodology for conducting peer reviews of
contracting actions and ensure that experienced and trained contracting
officials perform the reviews.
Response: Concur:
NBC Action:
On December 2, 2004, NBC Southwest Acquisition Office (Fort Huachuca)
established a detailed policy and procedure for conducting peer
reviews.
The implementation of this policy was specifically reviewed during the
AMR at the Southwest Acquisition Office on March 8-9, 2005.
An action plan will be developed when the findings are received in the
final AMR.
(b) Ensure that reviews of BPA's are done annually, as required by FAR,
to determine whether they still represent best value.
Response: Concur:
NBC Action:
* NBC developed management review criteria tailored specifically to
assess the process and procedures being utilized at the four NBC
Acquisition Offices when issuing orders under GSA schedules or under
internally created BPA/IDIQ contracting instruments. The review
criteria also assesses whether files contain proper documentation and
that contracting personnel are following all applicable rules and
regulations.
* On December 16, 2004, the NBC Southwest Acquisition Office established
a local policy to ensure that reviews of BPAs are accomplished
annually.
* An NBC-wide BPA policy is being developed to reinforce that the award
administration and annual review requirements are being followed at all
sites. The policy will be completed by June 17, 2005. NBC will perform
a process review at all NBC Acquisition Offices during FY 2006 as
required by the PAM management control review guidance.
(c) Ensure that the contracting staff is properly trained, and
effective mechanisms are in place to track training.
Response: Concur:
NBC Action:
* On December g, 2005, the NBC Southwest Acquisition Office implemented
a local procedure requiring that a training plan be developed for an
individual within two weeks of employment at that office. Specific
guidelines, timeframes for completion, and annual assessment of
training are addressed in this procedure.
* NBC has completed updating the warrant-related training history for
all NBC acquisition offices personnel who hold warrants, and is working
diligently to complete a training inventory for all staff across the
acquisition function.
* NBC continues to work with the Department's Office of Acquisition and
Property Management (PAM) and the other DOI bureau procurement chiefs
to continually review and revise the warranted contracting officers
training requirements and qualification standards.
[End of section]
Appendix IV: Comments from CACI International Inc.
CACI:
April 07, 2005:
Mr. David E. Cooper, Director:
Acquisition and Sourcing Management:
United States Government Accountability Office:
441 G. Street, N.W.
Washington, D.C. 20548:
Dear Mr. Cooper:
Re: CACI Comments on Draft GAO Report:
I. Executive Summary:
CACI International Inc and CACI Premier Technology, Inc. (collectively
"CACI") submit the following comments on the GAO's draft report,
Interagency Contracting, Problems with DOD's and Interior's Orders to
Support Military Operations (GAO-05-201) ("GAO Report" or "Report").
CACI believes that the GAO Report has identified a number of areas in
which the Government can improve its contracting processes. CACI also
believes, however, that several aspects of the Report require
clarification or revision, as discussed further below.[NOTE 1] In
summary:
1. CACI recommends that the final Report more fully acknowledge the
impacts of the urgent, wartime circumstances on the contracting
practices used by the Army and Department of the Interior ("DOI") and
on the relationships between CACI and the Army and DOI.
2. CACI believes it acted reasonably and in good faith in accepting and
performing the delivery orders ("DOs") for intelligence support
services in Iraq that were awarded pursuant to a Blanket Purchase
Agreement ("BPA") established under CACI Premier Technology, Inc.'s
("CACI-PTI") GSA Federal Supply Schedule Information Technology ("IT")
contract, particularly given the exigent wartime circumstances and
prior course of dealing among the parties. Likewise, CACI believes that
the DOI acted reasonably under the circumstances in awarding those DOS
to CACI.
3. CACI submits that prior Government determinations that the DOs for
intelligence support services in Iraq were "outside the scope" of CACI-
PTI's GSA schedule contract, did not properly consider:
* The prior course of dealing between the Army and CACI's predecessor,
Premier Technology Group, Inc. ("PTG"), in using the GSA IT contract,
and its related BPA, for the acquisition of intelligence support
services; and:
* The importance of IT in the performance of intelligence support work,
including interrogation.
4. CACI believes that it (i) acted reasonably and with full disclosure
to the DOI and the Army in its selection of GSA labor categories and
labor rates for interrogation support services provided under the
Statements of Work ("SOWS"), and that (ii) contract scope
determinations should not be based on unduly narrow and mechanical
comparison of SOWS and GSA contract labor categories.
5. The suggestions in the Report that CACI's employees improperly
displaced Government employees in the acquisition process or had a
"conflict of interest" that undermined the integrity of the competitive
procurement process, are both unfair and unwarranted in that they fail
to consider all the relevant circumstances surrounding the award and
performance of the DOs and the contributions that CACI made to filling
an urgent need on the ground in Iraq.
6. CACI has enhanced its contracting policies and procedures as a
result of various Government reviews of those DOs, and believes that
the Report provides a baseline for improving the interagency
acquisition process.
II. Importance of the Unique Wartime Environment:
The GAO Report includes some recognition of the fact that the Army's
acquisition of the intelligence and other services discussed in the
Report occurred in unique, wartime circumstances. As the Report
correctly points out:
* "[At] the end of major combat in May 2003, the Army ... was expecting
a non-hostile situation and did not plan for an insurgency," Report at
5;
* The situation in Iraq at that time "was extraordinary-a wartime
environment and an atmosphere of turmoil and urgency," id. at 3; and,
* "[The Army] was unprepared for the volume of Iraqi detainees and the
need for interrogation and other intelligence and logistics services."
Id. at 5. [NOTE 2]
CACI believes, however, that the Report does not fully capture the
impact that the wartime conditions had on the parties-Government and
Contractor-and how they affected the contracting process used by the
Army. In order to provide a fully accurate picture of the situation,
this should be given additional emphasis in GAO's final report.
For example, the GAO Report criticizes DOI (and the Army) for awarding
the task orders to CACI without competition, citing the Competition in
Contracting Act ("CICA") and § 803 of the FY 2002 DOD Authorization Act
(P.L. 107-107). See Report at 3 & 8-9. Although the Report nominally
acknowledges that both CICA and § 803 permit awards without
competition, id. at 8-9, it does not recognize that the exigent
circumstances which the Army confronted in Iraq fell squarely within
the exemptions available under those statutes.
In this regard, CICA and its implementing regulations expressly permit
awards without competition where "the agency's need for the property or
services is of such an unusual and compelling urgency that the United
States would be seriously injured unless the agency is permitted to
limit the number of sources from which it solicits bids or proposals."
10 U.S.C. § 2304(c)(2); see also FAR 6.302-2.[NOTE 3] Similarly, § 803
and its implementing regulations include an exception to the special
ordering procedures applicable to DOD purchases of services under a GSA
schedule contract where "[t]he ... need for the ... services is so
urgent that [placing orders on a competitive basis] would result in
unacceptable delays." FAR 16.505(b)(2)(i); see also DFARS 208.404-70(b)
(1).
CACI recognizes that these statutes and their implementing regulations
require a procuring activity to comply with certain justification,
approval, and/or documentation requirements (see FAR 6.302-2(c); DFARS
208.404-70(b)), and CACI is not suggesting that agencies can or should
ignore those requirements when contracting without competition.
Further, CACI is not in a position to question GAO's conclusion that
DOI (and the Army) did not prepare the required documentation here.
CACI does believe, however, that the final GAO Report should more
clearly acknowledge that, while the two agencies apparently did not
comply with all of the procedural requirements applicable to an award
without competition, the exigent wartime circumstances in Iraq fully
supported a sole-source award to CACI.
As discussed further below, the unique wartime circumstances also
impacted and influenced other aspects of the working relationships
among CACI, DOI and the Army in connection with the acquisition.
III. The Conclusion That the Task Orders Were "Outside the Scope" of
CACI's Contract:
The Report focuses on 11 DOs that were issued to CACI between August
2003 and March 2004, by DOI's National Business Center ("NBC") at Ft.
Huachuca pursuant to a BPA that had been established under a GSA IT
schedule contract. [NOTE 4] The Report states that the DOI IG and GSA
determined that 10 of the 11 DOs were outside the scope of CACI-PTI's
GSA IT contract and that the Army also concluded that certain of the
services called for under the DOs were outside the scope of that
contract. Report at 7. CACI notes that all of those determinations were
made nearly a year after the initial DOs were awarded and after the
agencies involved had come under intense public scrutiny as a result of
the events at Abu Ghraib. [NOTE 5] Further, those after-the-fact
determinations were made without prior consultation with CACI; for
example, the DOI IG never requested any information from or
communicated with CACI regarding its review of the DOs, and CACI was
not previously even aware that the Army had reached any conclusion on
the contract scope issue. CACI did subsequently address GSA's concerns
regarding the use of the GSA IT contract in discussions with GSA's
Suspension and Debarment Official, and CACI has enhanced its internal
procedures for addressing contract scope issues.
Contrary to the after-the-fact determinations discussed above, CACI
understands that the DOI Contracting Officer ("CO") had determined that
the intelligence support and other services covered by the DOs were
within the scope of the GSA contract at the time they were issued.
[NOTE 6] For example, a DOI official was quoted as stating that "[i]n
this case, the contracting officer determined that the interrogators
would be using IT equipment provided by the contract by entering
information into databases, analyzing the information collected using
IT software and disseminating the intelligence to other military
commands using the IT systems." Army's Use of IT Contract to Hire
Interrogators Questioned, Computerworld (May 31, 2004). As discussed
below, CACI submits that the DOI CO's determination was reasonable in
light of all the facts and circumstances, as was CACI's acceptance of
those DOs.
As GAO itself has recognized, whether work is within the scope of a
particular contract is "primarily an issue of contract interpretation
and judgment by the contracting officer." Rebuilding Iraq, Fiscal Year
2003 Contract Award Procedures and Management Challenges, GAO-04-605 at
15 (June 2004). In addition, there are "no statutory or regulatory
criteria or procedures that guide a contracting officer in making this
determination," id., but rather only "guiding principles" as set forth
in GAO and judicial bid protest decisions. Id. [NOTE 7] Further, as the
Federal Circuit has stated, in deciding whether a contract modification
is subject to a requirement for competition (i.e., is within the scope
of an existing contract):
The analysis thus focuses on the scope of the entire original
procurement in comparison to the scope of the contract as modified.
Thus, a broad original competition may validate a broader range of
later modifications without further bid procedures.
AT&T v. Wiltel, 1 F.3d at 1205. Accordingly, a CO should have more
latitude in making contract scope determinations under a GSA Schedule
70 (IT) contract, as such contracts necessarily cover a very broad
range of potentially available services. As stated by GSA, Schedule 70
includes "[t]housands of companies offering several million products
and services." [NOTE 8]
CACI submits that, for the reasons set out below, the "out-of-scope
determinations" referenced by GAO do not reflect the kind of careful
interpretation and judgment necessary for determining whether the work
called for under the DOs was within the scope of CACI-PTI's IT schedule
contract.
A. Failure to Consider the Prior Course of Dealing:
Because contract scope determinations involve issues of contract
interpretation, the prior course of conduct between the parties is
relevant to such determinations, just as it is to any other issue of
contract interpretation. See G&H Mach. Co. v. United States, 16 Cl. Ct.
568, 577-78 (1989) (where the Government argued that the course of
dealing between the parties should be given "controlling weight" on an
issue of contract scope under a contract administered by GSA). [NOTE 9]
As the courts and boards have frequently observed, the course of
performance before a dispute arises reflects a "practical
interpretation of the contract by the parties ... [that] is entitled to
great, if not controlling weight." Montana Power Co. v. United
States, 8 Cl. Ct. 730, 735 (1985) (quoting Inland Empire Builders, Inc.
v. United States, 191 Ct. Cl. 742, 755 (1970)). Indeed, the conduct of
the parties can provide the basis from which a court or board can infer
that they have agreed to modify its terms. See, e.g., id. at 735-36;
Carabetta Enter., Inc. v. United States, 58 Fed. Cl. 563, 567 (2003);
G&HMach. v. U.S., 16 Cl. Ct. at 578 (same). Here, however, the post hoc
contract scope determinations made by the DOI, GSA and, we assume, the
Army, failed to consider the prior course of dealing between the Army
and CACI-PTI's predecessor, PTG, as described below.
PTG obtained its first order for intelligence-related services under
its GSA contract on May 27, 1999. That order was issued by GSA's FTS
Office of Information Security, Washington, DC, pursuant to a
competitive solicitation. (GSA RFQ No. TIB-99133-JF1, May 13, 1999.)
[NOTE 10] The CO and COTR involved with that contract action were
both GSA employees. [NOTE 11] The RFQ for the work clearly contemplated
an award under a GSA schedule contract.
The subject GSA RFQ was issued to support U.S. Army Europe ("USAREUR")
Office of Deputy Chief of Staff, Intelligence ("DCSINT"). The SOW
provided that its "objective" was "to provide the full scope of
intelligence analysis required for battle staff planning concerning
intelligence preparation of the battlefield (IPB) support[ing]
contingency operations in the European Theater of Operations."
Functional requirements included, among others, signals analysis (all
sources) and HUMNIT/Counterintelligence. The RFQ defined the "skill
set" required for HUMNIT/Counterintelligence positions, for example, to
include personnel:
Capable of providing the full range of CVHUMINT expertise including
collection, management, analysis and tasking. Focused on support to
contingency operations and the force protection aspects of those
operations. Experienced with counterterrorism, subversion, sabotage
and espionage threats posed by various entities within the area of
operations. Familiar with threat analysis, operations, related systems:
MDITDS, IIR production, VCHPAS and DIAMS.
RFQ SOW § 2, Functional Requirements.
That original GSA DO required PTG to provide 25 Senior Intelligence
Analysts and five Intelligence Analysts who could meet the functional
requirements of the SOW, and specifically incorporated the SOW into the
order. Moreover, GSA awarded the work even though PTG's GSA schedule
had no labor category listing for "Senior Intelligence Analyst" or
"Intelligence Analyst," and the job requirements in the SOW did not
"match" those in PTG's GSA contract. Further, PTG's proposal made clear
that it was using labor rates from its GSA IT contract in responding to
the RFQ. [NOTE 12]
GSA issued this initial DO for a period of 90 days and subsequently
extended it for an additional nine months, through May 31, 2000.
Shortly after the award of that GSA DO, PTG received a DO to provide
additional intelligence support services to the USAREUR's DCSINT that
was issued by the Army's contracting office at Ft. Huachuca pursuant to
the PTG GSA contract BPA. PTG continued to provide intelligence support
services to the Army (and to other DOD components) under the PTG GSA
contract through, and subsequent to, the time that the contracts of PTG
were acquired by CACI. This included intelligence support services
provided under DOs issued under the GSA contract BPA by the contracting
office at Ft. Huachuca. [NOTE 13]
The intelligence support services called for under the DOs addressed in
the GAO Report are similar to those which PTG had been providing to its
Army customers for several years prior to its acquisition by CACI. Yet
DOI and GSA apparently summarily determined that all the intelligence-
related DOs were out of scope and did so without any apparent
consideration of established practice. [NOTE 14] CACI submits that the
screening and interrogation services called for in the DOs that are the
subject of the GAO Report are not inconsistent with past practice, as
they, too, are and were understood by CACI's employees to be
intelligence support services. Accordingly, given the prior course of
dealing and exigent wartime circumstances, it was not unreasonable for
the Army (acting through DOI'S NBC) to award CACI-PTI task orders for
intelligence support services under its GSA contract, even if the labor
categories listed in that contract did not precisely match those in the
Army's SOWs for work in Iraq.
B. Failure to Acknowledge that Intelligence Support Work Involves IT:
CACI believes the post hoc judgments that the intelligence support DOs
were outside the scope of its GSA IT contract reflect an unduly narrow
view of intelligence support and of the requirements of the DOS.
Moreover, CACI does not believe that mechanical comparisons of labor
categories from the Army's SOWS with those from the GSA contract like
that in Table 1 of the GAO Report, provide an adequate basis for
concluding that the DOs were outside the scope of the GSA contract. For
example, in a recent DOD-sponsored report on IT occupations in the
military, the Rand Corporation included "intelligence" in its list of
military "IT related" occupations, i.e., those "that rely extensively
on IT in duty performance." Rand Corp., National Defense Research
Institute, Attracting the Best, How the Military Competes for
Information Technology Personnel (2004) ("Rand Report") at 9; see also
id. at 24 & 97. [NOTE 15] In discussing intelligence as an IT-related
occupation, the Rand Report stated:
We view intelligence as IT related for two main reasons. First, signal
intelligence seems to fit naturally with the IT classification, given
its heavy use of IT systems. The other aspect of intelligence, human
intelligence, can also be interpreted as an IT occupation, because it
includes not only the gathering of information through interrogation,
but also the compilation and access to that information, which are
assisted now by IT.
Id. at 24 (emphasis added).
To our knowledge, the after-the-fact Government determinations
(including GAO's) that the work was "out of scope," did not consider or
recognize the importance of IT in performing the intelligence support
work required under the DOs. For example, the SOWS for the two DOS for
interrogation support services specifically required CACI to provide
ADP equipment and recognized that such equipment was "required for
effective [interrogation support] operations." See DO 35 (Interrogation
Support), SOW at 6; DO 71 (HUMINT Support Teams), SOW at 4. In
addition, DO 71 required CACI to provide personnel experienced with
various databases and systems (see DO 71, SOW at 2-3), and DO 72 (C2
Intelligence Support Staff) specifically called for an Information
Management Specialist and an Intelligence Architecture and
Communications Engineer, both of whom were required to have extensive
IT experience and who provided "critical and unique technical skills in
the management of CJTF-7 intelligence and information management
architectures." DO 72, SOW at 4. [NOTE 16]
More generally, the necessity to track, cross-reference, link and
transmit large volumes of data in a timely fashion makes IT a critical
component of successful interrogation operations. See also Rand Report,
supra, at 24. For example, in describing the screening process, the SOW
for DO 36 (Screening Cell Support) stated that Phase I, " Preparation,"
begins by "[c]onducting name check of [Host Country Nationals ("HCNs")]
scheduled for screening using the HCN data base and any other
applicable agencies to obtain pertinent information needed to conduct
the interview." DO 36, SOW at 1. The SOW goes on to state that in Phase
II, Reporting Results, "[a]fter conducting the interviews, the data
base administrator (or screener, where applicable) will update the
information on the HCN . . . from the interview in the locally held HCN
database." Id. at 2. Similarly, successful interrogation requires a
broad range of skills, including good questioning techniques, a good
memory, report-writing abilities, the capability to research, and IT
hardware, software and skill sets. This is because no single
interrogation of a detainee stands on its own. He and his story,
background, family, personal and professional alliances, and his
activities may be connected to other detainees, present, past and
future. Moreover, a historical and evidentiary file must follow the
detainee from the time he is apprehended, until he is either turned
over to host-nation authorities or released into the general
population.
CACI personnel working in Iraq regularly used IT equipment in
performing intelligence support work, including screening and
interrogation. [NOTE 17] For example:
* IT is needed at even the lowest levels to begin tracking a detainee's
record from the time of apprehension (including, in particular,
circumstances of capture) until release.
* At the lowest level where equipment and connectivity can be
supported, detainee biometric data (photo, fingerprints, and iris scan)
is collected and entered into a large database with controlled
accessibility, to further the intelligence collection mission.
Retrievable historical and empirical data is required to adequately
prepare for, conduct and follow up on interrogation and screening
operations. IT also enables interrogators to conduct research on the
detainee himself, his organization, affiliations, and other detainees
who may be connected to him in any way, shape or form before going into
the "booth." Similarly, additional research is always conducted after
the interrogation is finished, as databases, message traffic, other
interrogation reports, and intelligence websites are reviewed to check
the veracity of the detainee's information. These areas are also
reviewed to prepare the interrogator and analyst for the next time the
same detainee is interrogated.
The interrogator and the analyst both use IT software and hardware to
produce intelligence information reports and put them into a larger
database so others can use the information to further the overall
intelligence cycle.
Finally, the IT systems used by interrogators, screeners and
intelligence analysts supporting interrogation operations include:
Biometric Automated Toolset Suite ("BATS"); analysts Notebook (used to
conduct link analysis of detainees and other human sources and their
activities, such as meetings, phone calls and vehicle usage); various
classified and unclassified intelligence web sites; mapping and photo
programs; open-source websites; and message-handling systems.
C. CACI's Selection of Contract Labor Categories Was Reasonable:
As noted above, CACI does not believe that a determination of whether
the work was in or out of scope should be based on a mechanical
comparison of the labor categories in the SOWs with those in the IT
contract. Similarly, CACI submits that the assertion in the Report (at
8), that "CACI selected the labor categories in the contract for cost
and pricing purposes rather than as a reflection of the work to be
performed," while accurate, has been taken out of context, and that
CACI's approach was reasonable under the circumstances.
In providing professional services to support the Army's requirements
for intelligence personnel and related services in Iraq, it was
necessary for CACI to relate the positions identified in the Army's
SOWS to labor categories on its GSA schedule contract. In other words,
CACI had to relate labor categories from its GSA schedule contract to
the job descriptions in the SOWs. This was similar to the practice that
CACI's predecessor, PTG, followed in providing intelligence support
services to the Army since the first DO was issued by GSA in 1999.
More generally, the specific labor category elements included within a
SOW for an IT task order are rarely worded so as to create an exact
match with the labor categories on a GSA schedule contract. As a
result, a contractor typically will attempt to "match" or relate the
requirements in a SOW to its existing job descriptions and contract
labor categories. Typically, however, there is not a perfect, word-for-
word correspondence between the SOW job title/requirements and the GSA
schedule labor categories, nor is one required. We believe this is
consistent with GSA's view. For example, GSA recently responded to an
allegation in a bid protest that an offeror had proposed services that
were outside the scope of its GSA Schedule 70 IT contract because the
offeror did not have a specific labor category on its contract for the
services required by the user agency. In doing so, GSA's Deputy
Director of the Information Technology Acquisition Center, and longtime
GSA CO, stated:
The Group 70 Information Technology Schedule does not solicit specific
labor categories. Offerors are asked to respond to the Solicitation
with their commercial services, identifying . . . the general nature of
the services. GSA does not define labor categories, but rather asks the
vendor to provide a description of the background and capabilities of
each offered category.
As such, an ordering activity is advised not to specify a particular
labor category. The [ordering activity's] requirement should be stated
as a need or problem to be solved, with the vendor left to formulate
and articulate a solution to meet the requirement.
Letter from Robert D. Bourne, Jr., Deputy Director, Information
Technology Acquisition Center, Federal Supply Service, to Sharon
Larkin, GAO Procurement Law Control Group, Subject: Protest of American
Systems Consulting Group, Inc. (ASCI), B-294644 (Nov. 22, 2004). We
submit that this is a sensible and practical interpretation of the
relationship between the positions set out in a particular SOW and in
the GSA IT schedule contract labor categories.
The process of relating the positions in the Army's SOWS for
intelligence support services to the labor categories in CACI-PTI's GSA
contract was further complicated by the fact that CACI had to recruit
and retain employees for work in the Iraq war zone where they were (and
still are) under constant threat of attack, as well as risk of capture
and possible execution. Thus, CACI had to determine what salary/
benefits it would need to pay to attract qualified individuals to serve
in Iraq in the positions identified in the SOWs. [NOTE 18] After
determining the required salary/benefits for a given position, CACI
then identified a labor category on its GSA schedule contract that, in
light of the number of hours the individual filling the position was
expected to work, provided a rate that was sufficient to cover the
anticipated salary and benefit costs and applicable margin. That labor
rate from the GSA schedule would then be used in invoicing for work
performed under the DO. (Individuals working in Iraq also received
certain allowances that are treated as ODCs.)
Accordingly, the selected GSA schedule contract labor categories were
not intended to suggest a precise congruence between the job
responsibilities of the positions called for in the Army's SOWS and the
job titles/responsibilities of the labor categories on the GSA
schedule. Moreover, the proposals that CACI submitted to DOI fully
disclosed that it was using the labor rates from the GSA schedule
contract for the positions specified in the SOWs.
For example, the cover letter to CACI's proposal for DO 35
(Interrogation Support Cell) clearly stated that "[t]he estimated costs
. . . are based upon CACI's GSA IT Schedule No. GS-35F-5872H."
Similarly, one of the proposal's "Assumptions and Clarifications" (No.
14) stated that "[t]his order is priced using CACI-PTI's currently
approved GSA Schedule Pricelist." That proposal also included tables
which (i) showed the applicable GSA IT contract labor categories,
corresponding hourly rates from that contract, and estimated hours for
each position, and (ii) paired the "functional" labor categories in the
SOW with the applicable hourly labor rates from the GSA contract. In
short, both DOI and the Army were fully aware CACI was using labor
categories from its GSA IT contract in providing personnel to perform
the work specified under the DOs, including interrogation and screening
support. Moreover, those GSA contract labor rates were the same as the
rates that had been used in previous acquisitions of intelligence
support services from PTG. [NOTE 19]
IV. The Suggestions that CACI Employees Improperly Displaced Government
Employees or Had "Conflicts of Interest" that "Undermin[ed] the
Integrity of the Competitive Contracting Process" are Unfair and
Unwarranted:
The Report asserts that "the contractor effectively replaced government
decision-makers in several aspects of the procurement process" and that
this participation in the procurement "creates a conflict of interest
and undermines the integrity of the competitive contracting process."
Report at 13-14. CACI is concerned that this assertion provides an
incomplete presentation of the activities of its employees that fails
to set out all of the relevant facts and that is based on a failure to
recognize the unique facts and circumstances surrounding the award and
performance of the subject task orders.
As discussed above, the acquisition was conducted in urgent, wartime
circumstances when the Army found itself with an immediate need for
intelligence support services, including interrogation services, which
it could not fill internally. These difficulties were compounded by the
fact that the Army's local, in-country contracting personnel were
focused on providing basic necessities and unable to devote time and
resources to the acquisition of intelligence support services. Further,
as the GAO Report acknowledges (at 14), communications between Iraq and
Ft. Huachuca were problematic. Under these circumstances, in an effort
to assist Army personnel stretched thin dealing with the situation,
CACI employees did step into the breach and provided information and
assistance to Army and DOI personnel involved in the acquisition. While
those involvements may have been different from, or even more
substantial than, those found in a typical domestic, peacetime
procurement, we submit that peacetime procurements are not an
appropriate basis for assessing the appropriateness of the action
taken. In addition, and most important, while CACI provided information
and assistance, there is no question that all procurement decisions
were made by the responsible Government (DOI and Army) personnel.
As discussed more fully below, we are concerned that the Report fails
to acknowledge the contributions that contractors such as CACI have
made in meeting the DOD's urgent, wartime need for additional
intelligence capabilities. In that regard, we call GAO's attention to a
recent report by Vice Admiral Albert T. Church, III, Naval Inspector
General, on DOD's interrogation operations that was issued after the
GAO completed its draft Report. See Executive Summary of review of
Department of Defense interrogation operations, Vice Admiral Albert T.
Church, Naval Inspector General (Mar. 2005) ("Church Report") (http://
www.defenselink.mil/news/Mar2005/d2005O3IOexe.pdf). In his report,
Admiral Church concluded that:
* "It is clear that contract interrogators and support personnel are
`bridging gaps' in the DoD force structure in GTMO, Afghanistan and
Iraq. As a senior intelligence officer at CENTCOM stated: `[s]imply
put, interrogation operations in Afghanistan, Iraq and Guantanamo
cannot be reasonably accomplished without contractor support,' id. at
17;
* "Overall, we found that contractors made a significant contribution to
U.S. intelligence efforts," id.; and, Contractor personnel "often
served longer tours than DoD personnel, creating continuity and
enhancing corporate knowledge at their commands." Id.
A. Involvement in Defining Requirements and SOWs:
CACI personnel did assist the Army in defining its requirements for
intelligence support services and in developing the SOWS for those DOs.
They also provided ROM estimates of the cost of that work prior to
award.[NOTE 20] However, these involvements were at the request of
responsible Army personnel and subject to their review and approval.
Further, these involvements need to be seen in the context of the facts
on the ground in Iraq. [NOTE 21]
There is no general prohibition on prospective contractors providing
information or input to procuring agencies regarding their requirements
or SOWS. See generally FAR 15.201 (permitting exchanges between
Government and industry, including on matters relating to requirements,
industry capabilities, and SOWs). Moreover, DOD and its services have
recognized the need for flexibility and expeditious action to meet the
needs of its war fighters. Accordingly, we submit that it is in the
Government's interest to interpret existing regulations in a manner
that does not deter its in-country personnel from utilizing the
contractor expertise available to it under such circumstances.
CACI recognizes that FAR Subpart 9.5 imposes certain ground rules on a
contractor's participation in procurements for which it prepared or
assisted in preparing the SOW, see FAR 9.505-2, and CACI has policies
and procedures in place to comply with those ground rules. CACI does
not believe, however, that any input its employees had in the
preparation of SOWs for the Iraq DOs implicated the concerns identified
in FAR Subpart 9.505-2(b)(1), which is the only provision of FAR 9.505
that is potentially applicable here.
The mere fact that a contractor had some input in preparation of the
SOW for a procurement does not create an impermissible conflict of
interest under FAR 9.505-2(b)(1). Further, the limitations in FAR
Subpart 9.505-2(b)(1) relating to contractor preparation of SOWS are
directed at competitive procurements and aimed at preventing one
offeror from obtaining an unfair competitive advantage over its
competitors. FAR 9.505-2(b)(1)(i) specifically recognizes that a
contractor's preparation of or assistance in preparation of a SOW for
supplies or services does not create a conflict of interest where "[i]t
is the sole source." See also Litton Computer Serv., B-256225, 94-2
C.P.D. 36 (July 21, 1994) (where GAO applied this exception to a sole
source award based on urgent and compelling circumstances). As
discussed above, the decision to award the DOs to CACI on a sole source
basis was made by the Government, not CACI, and that judgment was fully
consistent with applicable laws and regulations, given the exigent
wartime conditions on the ground in Iraq. That said, CACI agrees that
having a SOW on CACI "letterhead" was a mistake and simply should not
have happened. However, that error did not, for the reasons noted
above, undermine the integrity of any competitive procurement process.
FAR Subpart 9.5 imposes a duty on Government acquisition officials to
identify, evaluate and take steps to avoid or mitigate potential
conflicts of interest. See FAR 9.504 & 9.506. At no time was CACI
informed that the Army or DOI believed that any input by a CACI
employee in the definition of requirements or development of the SOWS
presented an impermissible conflict of interest or required any kind of
mitigation effort. Indeed, given the urgent wartime conditions, it
appears that the Government concluded that it was in the best interest
of the Government to obtain input from experienced CACI employees in
defining its requirements and developing the SOWs. Moreover, the SOWs
for the Iraq DOs were subject to review and approval by the Government,
and the decision to proceed with the procurement and issue the DOs to
CACI was made by appropriate Government personnel in Iraq (including
the Coalition Acquisition Review Board) and at DOI's NBC at Ft.
Huachuca. Finally, as the discussion below demonstrates, CACI does not
believe that any of the other activities cited by GAO even remotely
created any kind of "conflict of interest" or otherwise "undermined"
the integrity of the procurement process.
B. Other Activities neither Replaced Government Decision-Making nor
Undermined the Integrity of the Procurement Process:
1. Identification of the BPA as a Potential Contract Vehicle:
The Report implies that CACI employees acted inappropriately in
identifying the DOI BPA as a possible contract vehicle for acquiring
the intelligence support services. This is mistaken. There is simply
nothing improper with a contractor informing Government personnel of
the availability of a contract vehicle that the Government could use to
acquire particular supplies or services. See also FAR 15.201(c)
(encouraging exchanges with industry to, inter alia, "identify and
resolve concerns regarding the acquisition strategy, including [among
other things] proposed contract type [and] terms and conditions").
Further, CACI's discussions with Army contracting personnel in Iraq and
Kuwait need to be seen in context. As discussed above, when queried
about providing contracting assistance, those Army contracting offices
indicated they were overwhelmed and not in a position to contract
directly for the types of intelligence support services that the Army
needed. Thus, the Army's in-country contracting officials reasonably
asked if CACI had an existing contract vehicle that could be used to
procure those services, and when they were informed of the BPA
administered by Ft. Huachuca, told CACI to deal directly with Ft.
Huachuca. This was extremely reasonable under the circumstances.
Moreover, as discussed above, the Army had a well-established practice
of acquiring intelligence support services under the PTG/CACI-PTI BPA
through the Ft. Huachuca contracting office (which had previously been
operated by the Army). Thus, it is not surprising that CACI was
encouraged to use that familiar vehicle to fill the requirements in
Iraq. See also Report at 5, 10 n.17.
2. Facilitating Communications and Submission of Invoices:
The Report's criticism of the involvement of CACI personnel in
facilitating communications between the Army users in Iraq and the DOI
contracting office in Arizona, is similarly misplaced. It simply
ignores the fact-apparently confirmed by DOI (see Report at 14)-
that it was difficult for DOI to communicate directly with Iraq. While
the level of contractor involvement in communicating information was
perhaps unusual, it was done as an accommodation to the Government.
Given that the acquisition was conducted on a sole source basis, there
was no prejudice to the competitive procurement process.
Regarding submission of invoices, CACI submitted them to the COR for
review and approval in accordance the terms of the DOS. [NOTE 22] While
the contract contemplated that the COR would forward invoices to the
payment office, the circumstances in Iraq made that difficult, slow and
chancy. Accordingly, CACI personnel assisted by carrying the invoices
out of Iraq and forwarding them to the DOI payment office. While
perhaps atypical, these actions were entirely ministerial, and CACI
categorically rejects any suggestion that this accommodation was in any
way improper.
3. Out-of-Scope "Construction" Work and Draft Justification for Sole
Source Award:
The Report's comments on a "request" to perform out-of-scope
construction work under the BPA, and preparation of a draft
Justification and Approval ("J&A") for additional, sole source work,
are incomplete and out of context. In the Fall of 2003, after
consultation with the COR and other Army officials, CACI was asked to
undertake certain building renovation work that was needed to provide
facilities for performance of its (LEP) screening work. Consideration
was initially given to performing this work under a modification to DO
36, on the ground that the work was incidental to performance of the
LEP screening effort required by that DO. The GAO Report, however,
fails to mention that relevant DOI and Army personnel were directly
involved in that process and were clearly prepared to have the work
done under that DO. Moreover, as documents which CACI provided to GAO
show, it was CACI's contracts officials who concluded that such
renovation work was not within the scope of CACI's GSA IT contract and
should be done under a separate contract. That determination was
communicated to DOI, which concurred and issued a separate contract to
CACI for that work. Further, the value of this effort was indeed not
material in amount, approximately $199,000.
CACI understands that the draft J&A referenced at page 13 of the Report
relates to another facility rehabilitation project that was undertaken
by CACI shortly after the one described above. Again in this case, CACI
was asked to renovate certain space for use by CACI personnel who were
involved in the intelligence support effort. Consistent with the
decision on the previous renovation project, the parties (DOI and CACI)
planned to have this work performed under a separate contract and not
under the BPA. CACI submitted a draft sole source justification to DOI
for that work. DOI subsequently sent CACI the DOI's sole source
justification from the prior renovation project so it could be adapted
for the new work. CACI accommodated DOI's request and returned the
revised sole source justification to DOI. More important, according to
CACI's final cost proposal, the cost of this work was about $99,500,
well below the applicable simplified acquisition threshold and, as
such, not subject to a requirement for competition or the need for a
sole source justification. See 10 U.S.C. §2304(a)(1) & (g)(1)(A); FAR
6.001(e); FAR 2.101, 48 C.F.R. §2.101 (2003) (defining simplified
acquisition threshold, which, for the work at issue here, was at least
$200,000); see also Information Ventures, Inc., B-290785, 2002 C.P.D.
152 (Aug. 26, 2002). Moreover, given the limited nature, location and
urgency of the effort, CACI does not believe that there is any basis
for suggesting that its action here compromised the integrity of the
competitive contracting process.
Finally, we note that, due to poor coordination and delays in
paperwork, CACI completed the work before a contract was issued. Ft.
Huachuca then took the position that, since the work had been
completed, it would not issue a contract and told CACI to pursue a
ratification with the Army. CACI has paid about $60,000 to an Iraqi
subcontractor for the work, but has not received any payment from the
Government for that work.
V. Monitoring of Contractor Performance:
CACI recognizes that the Report's comments regarding surveillance of
contractor performance are directed principally at DOI and the Army.
CACI does not disagree that the Government is responsible for oversight
of contractor performance and that such oversight is appropriate. CACI
believes, however, that the criticisms of the Army are somewhat unfair
given the circumstances in Iraq.
As the Report notes, contractor employees were, and continue to be,
stationed at multiple locations throughout Iraq. While the Army perhaps
ideally should have had a COR at each of those sites, conditions in
Iraq were not ideal and, as noted above, the Army was operating in an
environment in which its internal resources were already stretched
thin. Moreover, while the Army may not have had a formal COR assigned
to each location, CACI employees worked under the supervision of
military personnel.
In addition, the Army's COR assigned to administer CACI's work has
indicated that he was very pleased with the support provided by CACI.
[NOTE 23] Further, as discussed above, Admiral Church recently
concluded that contractors such as CACI "[have] made a significant
contribution to U.S. intelligence efforts." Church Report at 17.
CACI agrees with the general statement that Government oversight is
appropriate where work is performed on a Time and Materials ("T&M")
basis. We believe, however, that CACI's work was subject to adequate
surveillance in this regard, and do not understand the Report to
suggest that the Government did not get "good value" from CACI. Report
at 12.
VI. Conclusion:
CACI appreciates the opportunities which GAO has afforded to CACI to
provide information and input, including the opportunity to submit
these comments. As discussed above, CACI believes that the Army's and
DOI's use of the CACI GSA contract BPA was reasonable given the exigent
wartime circumstances that existed in Iraq in 2003 and the established
practice of use of PTG's GSA contract for the acquisition of
intelligence support services. As we have noted, however, CACI has
learned a number of lessons from reviews by GSA and other agencies and
has taken steps to enhance its contracting practices. CACI also
believes that the recommendations in GAO's Report will provide a
baseline for enhancement in the Government's acquisition processes.
Sincerely,
Signed by:
Jeffrey P. Elefante:
Executive Vice President, Secretary and General Counsel:
NOTES:
[1] These comments focus primarily on matters in the Report relating to
CACI and do not address GAO's comments and recommendations relating
solely to internal Government processes and controls.
[2] These findings are consistent with those in an earlier Army report,
which concluded that, although there had been a declaration of the end
of hostilities, the war had not ended. Rather, the Army found itself
confronting a complex counterinsurgency operation, which generated
significant, and unanticipated, numbers of detainees and a need for
intelligence for which the Army was not prepared in terms of personnel,
equipment and organization. AR 15-6, Investigation of the Abu Ghraib
Prison and 205th Military Intelligence Brigade, LTG Anthony R. Jones
(2004) at 8 & 10-11.
[3] As discussed below, CACI disagrees with the Report's contention (at
7) that the work covered by the task orders should have been competed
because it was outside the scope of the GSA contract held by CACI-PTI.
However, even assuming, arguendo, that the work at issue was outside
the scope of that contract, the award of that work to CACI-PTI without
competition was fully consistent with CICA due to the "unusual and
compelling urgency" that existed on the ground in Iraq.
[4] The BPA was originally awarded by the Army to PTG and was later
assumed and extended by DOI when it took over responsibility from the
Army for the contracting office at Ft. Huachuca. CACI acquired
substantially all of the assets of PTG, including its GSA contract and
the subject BPA, in mid-May 2003, shortly before DOI placed the DOs at
issue. See Report at 10 n.17.
[5] Those determinations were also made against a background of
heightened sensitivity to issues relating to the use of GSA schedule
contracts more generally, as a result of other audits released in 2004.
See, e.g., GSA Office of Inspector General, Audit of Federal Technology
Service's Client Support Centers, No. A020144/T/5/Z04002 (Jan. 8,
2004); DOD Office of Inspector General, Contacts Awarded for Coalition
Provisional Authority by the Defense Contracting Command-Washington
D.C. (D-2004-057) (Mar. 18, 2004).
[6] See "GSA Fact Sheet" (which was provided to GAO and which refers to
the DOI CO's determination); Federal Contracts Report, Vol. 81, No. 21
at 645-46 (June 1, 2004) (same). We do not read the GAO Report as
concluding otherwise on this point. See Report at 8. In addition, as
discussed below, the CO's determination that the orders were in scope
was consistent with the established practice of the parties.
[7] Those GAO and court bid protest decisions arose out of actions
brought by potential competitors contending that a modification was
"outside the scope" of the original contract and that the supplies or
services covered by the modification therefore should have been
competed. As the Court of Appeals for the Federal Circuit has observed,
"CICA sets forth no standard for determining when modification of an
existing contact requires a new competition or falls within the scope
of the original competitive procurement," AT&T Comm. Inc. v. Wiltel,
Inc., 1 F.3d 1201, 1205 (Fed. Cir. 1993), and each case must be decided
on its particular facts. See also n.3, supra, noting that out-of-scope
work does need to be competed where, as here, a CICA exemption applies.
[8] http://www.gsa.gov/Portal/gsa/ep/channelView.do?
pageTypeId=8199&channelPage=%252Fep%252Fchannel%FgsaOverview.jsp&
channelId=-13472. Schedule 70 includes "general purpose commercial
information technology, equipment, software and services." Special Item
Number ("SIN")132-51, Information Technology Services, includes
"resources and facilities management, database planning and design,
systems analysis and design, network services, programming, . . .
network services project management, data/records management,
subscriptions/publications (electronic media) and other services."
http://www.gsaelibrary.gsa.gov/ElibMain/ScheduleSummary?
scheduleNumber=70&x=5&y=6.
[9] G&H Mach apparently involved a GSA supply schedule contract and the
issue was whether repairs of certain types of equipment requested by
various user agencies were within the scope of the contract. See id. at
570 & n2. As noted above, the Government relied on the course of
dealing in opposing the contractor's contention that certain work was
out of scope. According to the Court, the Government contended that
"[the contractor's] acceptance of the equipment over the life of the
contract indicates that [the contractor] considered repair of the
equipment to be within the scope of the contract." Id. at 578. The
Court also looked to the course of conduct of the parties in concluding
that they considered the equipment at issue to be within the scope of
the contract, and went on to state that "[e]ven assuming that the
parties had not originally intended to include this equipment within
the scope of these classifications, the parties were free to modify the
existing obligations, in this case to expand the scope of the
classifications . . . ." Id. at 578.
[10] CACI understands that two or three other offerors also responded
to GSA's solicitation.
[11] GAO had information and documents provided by CACI relating to
this order, but the GAO Report includes only a very limited discussion
of this important background information. See Report at 5.
[12] GSA's competitive award of a task order for intelligence support
services that was priced on the basis of PTG's GSA contract labor rates
provides further confirmation that those rates were fair and reasonable
for the intelligence support work, see FAR 15.402(a) & (a)(1). Further,
the parties continued to rely on those rates in the pricing of
subsequent DOs.
[13] PTG also had an established practice-which continued after the
acquisition by CACI-of providing logistics support services to the
Army under the GSA BPA that were similar to those called for under Iraq
DOs 64, 67, 73 and 80 that are also the subject of the GAO Report. Even
assuming, arguendo, that those four logistics DOs were not within the
scope of the CACI-PTI IT schedule contract, however, those services
could-as both GAO and GSA have recognized-have been acquired under
a GSA logistics schedule contract (which CACI also has). Further, as
noted above, an order for those services could have been issued
directly to CACI pursuant to the urgent-circumstances exception in §
803 and its implementing regulations.
[14] This included the three intelligence DOs-open source
intelligence support and analysis (DO 37), special security office
assistance (DO 38), and general C-2 intelligence staff support (DO 72)
--that did not include any interrogation and/or screening effort.
[15] The Rand Report focused on the issues relating to the adequacy of
the supply of IT workers to meet manpower requirements of military and
intelligence agencies, and focused on occupations which the military
considered to be "IT" occupations.
[16] The duties of the Information Management Specialist included,
among other things, management of database development, review and
recommendations on software and hardware modifications, and
coordination and support of information management systems and network
enhancements project technical service requirements. See id. at 4-5.
The Intelligence Architecture and Communications Engineer's duties
included managing the overall intelligence and communications
architecture for CJTF-7 intelligence operations, and management of the
"Information Technology (IT) infrastructure and . . . CJTF-7 IT system
design and implementation effort, which includes all systems,
applications, and all local and wide area network connections in the
CJTF-7 areas of operation." Id. at 6.
[17] GAO reports that "Army representatives in Iraq" have said that
services for interrogators, screeners and logistics were "not
information technology services." Report at 8. We do not know who these
individuals were or the basis on which they reached that conclusion.
[18] The data available for making those determinations was limited at
that time. For example, there were no market surveys of salary and
benefits for the required positions in a war zone, and those addressing
positions outside a war zone were of limited use in determining the
salary and allowances necessary to attract an applicant to a position
in Iraq (as an applicant typically would expect a much higher
compensation package to work in a war zone than he or she would in a
more conventional setting).
[19] CACI understands that PTG received two economic price adjustments
(per Mod 0001, effective August 1999, and Mod 0004 in January 2002) to
its GSA labor rates between the date of the GSA-issued intelligence DO
in May 1999 and its acquisition by CACI. The "PTG" rates were used in
pricing DOs issued to CACI through September 15, 2003, which included
the initial DOs for work in Iraq.
[20] CACI does not understand the statement in the Report that CACI
personnel "suggest[ed] that Army officials use the company's rough
order of magnitude price as the government cost estimate." If the
Government used the cost estimates provided by CACI at Government's
request as the "government cost estimate," that was the Government's
decision. The Report also seems to imply that the Government was
required to prepare its own, independent cost estimate. We are not
aware, however, of any such requirement in relevant FAR provisions,
such as Subparts 8.4, 15.4 or 16.6.
[21] One of the CACI employees involved in these efforts had deployed
to Iraq with the Army's V Corps, for which he was providing
intelligence support services under a DO issued under PTG's GSA IT
contract by an Army contracting office in Germany. That employee had an
established working relationship with the Army officers who were
involved in defining the requirement for intelligence support services
and developing the SOWs. It is interesting to note that this employee
initially proposed a limited contractor intelligence support effort and
was told by Army personnel that they needed a much more substantial
level of contractor support.
[22] Consistent with its proposals and the requirements of its GSA
contract and accompanying BPA, CACI used the labor rates from the GSA
schedule in invoicing for work performed under the DOS. The invoices
that were submitted to the COR for approval and signature listed the
labor categories from the CACI-PTI GSA schedule contract (e.g., Sr.
Systems Engineer), the hours being billed, and the applicable labor
rates from the GSA IT contract. They also included a supporting
schedule in which the individual employees whose time was being billed
were paired, by name, with the GSA IT labor category and applicable
labor rate under which they were being billed.
[23] In that regard, we question whether GAO's observation (Report at
12), that one interrogator said that he had "no interaction with COR,"
is probative of a lack of adequate Government oversight.
[End of section]
Appendix V: Summary of Task Orders Issued to CACI for Work in Iraq:
Order number and date: 35 (8/2003);
Maximum order value: $19,915,407;
Description of order: Provide interrogation support;
Selected labor categories from the CACI contract: Senior System
Engineer, Training Specialist, Senior System Planner;
Department of Defense customer: Intelligence.
Order number and date: 36 (8/2003);
Maximum order value: $3,222,503;
Description of order: Provide screening cell management and support;
Selected labor categories from the CACI contract: Senior Security
Computer Specialist, Training Specialist, Database Manager;
Department of Defense customer: Intelligence.
Order number and date: 37 (8/2003);
Maximum order value: $1,254,367;
Description of order: Provide support to man, organize, and execute as
members of the Open Source Intelligence Team;
Selected labor categories from the CACI contract: Senior Systems
Engineer, Senior Computer Security Specialist, Database Manager;
Department of Defense customer: Intelligence.
Order number and date: 38 (8/2003);
Maximum order value: $998,117;
Description of order: Provide special security and security support to
the intelligence function;
Selected labor categories from the CACI contract: Senior Security
Computer Specialist, Communications Analyst;
Department of Defense customer: Intelligence.
Order number and date: 64 (9/2003);
Maximum order value: $952,695;
Description of order: Provide and maintain an operational property book
team;
Selected labor categories from the CACI contract: Project Manager,
Senior Editor/Writer;
Department of Defense customer: Logistics.
Order number and date: 67 (10/2003);
Maximum order value: $6,191,315;
Description of order: Provide technical and functional knowledge of the
total property book system;
Selected labor categories from the CACI contract: Principal Engineer/
Project Manager, Senior Computer Security Specialist;
Department of Defense customer: Logistics.
Order number and date: 70 (11/2003);
Maximum order value: $1,189,100;
Description of order: Provide technical and training support services
for a military information technology system;
Selected labor categories from the CACI contract: Program/Project
Manager, Database Manager;
Department of Defense customer: Logistics.
Order number and date: 71 (12/2003);
Maximum order value: $21,799,921;
Description of order: Assist in performance of human intelligence and
counterintelligence missions;
Selected labor categories from the CACI contract: Senior System
Engineer, Senior Analyst, Senior Functional Analyst;
Department of Defense customer: Intelligence.
Order number and date: 72 (12/2003);
Maximum order value: $4,895,478;
Description of order: Assist in intelligence support staff and
analytical functions;
Selected labor categories from the CACI contract: Senior Functional
Analyst, Senior Analyst, Senior Systems Engineer;
Department of Defense customer: Intelligence.
Order number and date: 73 (12/2003);
Maximum order value: $1,822,240;
Description of order: Establish and staff a Command Automation
Logistics Assistance/Instructional Team;
Selected labor categories from the CACI contract: Program/Project
Manager, Subject Matter Expert II;
Department of Defense customer: Logistics.
Order number and date: 80 (3/2004);
Maximum order value: $3,980,000;
Description of order: Provide technical and functional knowledge of the
total property book system;
Selected labor categories from the CACI contract: Program/Project
Manager, Subject Matter Expert I;
Department of Defense customer: Logistics.
Total;
Maximum order value: $66,221,143.
Source: GAO analysis of documents obtained from the Department of the
Interior.
Notes: The Department of the Interior Inspector General and the General
Services Administration determined that Order 70 was not out of scope.
Maximum order values include order modifications made subsequent to the
order date.
[End of table]
FOOTNOTES
[1] Task orders are placed against established contracts that provide
for the issuance of orders for the performance of tasks during the
period of the contract. In a prior report, we examined the fees charged
for some types of interagency contracting vehicles. See GAO, Contract
Management: Interagency Contract Program Fees Need More Oversight,
GAO-02-734 (Washington, D.C.: July 25, 2002).
[2] GAO, High Risk Series: An Update, GAO-05-207 (Washington, D.C.:
January 2005).
[3] Schedule contracts allow agencies to quickly procure commonly
available commercial goods and services at prices associated with
volume buying.
[4] In 1999, the Army acquired intelligence analysis support from
Premier Technology Group. CACI acquired the assets of Premier
Technology Group in May 2003, including the GSA contract.
[5] The CJTF was designed to conduct offensive operations to defeat
remaining noncompliant forces and neutralize destabilizing influences
in the Iraq theater to create a secure environment in direct support of
the Coalition Provisional Authority. Previous reports demonstrate that
DOD did not adequately plan for the acquisition support required to
perform its mission in Iraq. In fact, in June 2004, we recommended that
the Secretary of Defense develop a strategy for assuring that adequate
acquisition staff and other resources can be made available in a timely
manner to improve the delivery of acquisition support in future
operations. GAO, Rebuilding Iraq: Fiscal Year 2003 Contract Award
Procedures and Management Challenges, GAO-04-605 (Washington, D.C.:
June 1, 2004).
[6] The intelligence contract was extended until July 2005 and the
logistics contract was extended until April 2005.
[7] P.L. 108-375.
[8] Section 854.
[9] Section 802.
[10] Federal Acquisition Circular 2001-24, Item V--Federal Supply
Schedule Services and Blanket Purchase Agreements (BPA) (FAR Case 1999-
603).
[11] We recently described these competition requirements in the
context of out-of-scope orders (GAO-04-605).
[12] GSA determined that the orders for interrogation services could
not be purchased through any of the GSA Schedules, but the orders for
logistics services could have been procured through GSA's Logistics
Worldwide Schedule.
[13] P.L. 107-107.
[14] DFARS § 208.404-70 (effective Oct. 25, 2002).
[15] FAR Subpart 17.5.
[16] 31 U.S.C. § 1535; FAR § 17.502(a).
[17] An Economy Act determination and findings is not required when the
agency needing the services uses certain required or optional sources
of supply (such as GSA Schedule contracts) or for acquisitions using
government wide acquisition contracts (FAR § 17.500). These conditions
were not met in this instance because the Army--the agency needing the
services--was not ordering directly from the GSA Schedules and because
a government wide acquisition contract was not used.
[18] The BPA in question was originally established in 1998 between
Premier Technology Group Inc. (the assets of which were acquired by
CACI in May 2003) and the Army Directorate of Contracting at Fort
Huachuca, Arizona. In 2001, Interior's National Business Center assumed
responsibility for the contracting staff at Fort Huachuca, and the BPA
was transferred to Interior. Interior subsequently extended the BPA in
2003 to match the time frame of the underlying GSA contract.
[19] The maximum order threshold cited in the contract is $500,000. The
maximum order threshold is the point at which ordering agencies are to
seek additional price reductions beyond those offered under the
vendor's GSA contract.
[20] FAR § 16.601(b)(1).
[21] At the time, the contracting office did not have an attorney on
site and had to turn to Interior headquarters for legal advice. An
attorney was assigned to the office in September 2003.
[22] A best value determination is not typically involved in a sole
source award since there is no evaluation of competing proposals to
determine which prospective contractor's approach would represent the
best value to the government, price and technical factors considered.
In contrast, the price of a sole source award is determined to be fair
and reasonable using other techniques such as comparison to prices
known to be reasonable, cost realism analysis, or a detailed review of
the contractor's cost and pricing data, as described in FAR Subpart
15.4.
[23] 10 U.S.C. § 2330, as added by section 801 of the National Defense
Authorization Act for Fiscal Year 2002 (P.L. 107-107).
[24] GAO, Contract Management: Opportunities to Improve Surveillance on
Department of Defense Service Contracts, GAO-05-274 (Washington, D.C.:
Mar. 17, 2005).
[25] Interior's response includes a reference to enclosure 1, which
consisted of technical comments on our report and, as agreed with
Interior, is not reproduced in this report. We incorporated changes to
the draft based on the comments as appropriate. Further, the response
refers to one concern that was not included in enclosure 1. This word
choice was explained by Interior as an oversight that should have been
deleted from the response.
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