Inspectors General

Shortly after Valerie Lau's confirmation as Inspector General at the Treasury Department in November 1994, the agency awarded a sole-source management contract for $90,000 to Sato & Associates on the basis of unusual and compelling urgency. Ms. Lau said that competition for the contract was limited because she urgently needed the management study to help her make reassignments in her senior executive ranks and to marshal the resources needed to conduct financial audits required by the Government Management Reform Act of 1994 and the Chief Financial Officer Act of 1990. GAO contends that there was insufficient urgency to limit competition. Even assuming that a limited competition was warranted, it is clear that the agency violated the applicable statute and regulation by failing to request offers from as many potential sources as was practical under the circumstances. In February 1995, Mr. Sato submitted an unsolicited proposal for $91,000 to the Interior Department's Office of Inspector General (OIG) for work similar to that being done at Treasury. Interior, however, conducted a full and open competition and, in June 1995, awarded a contract to Sato & Associates for $28,920--suggesting that the price of Sato & Associates' sole-source contract with the Treasury OIG was artificially high. In September 1995, Treasury awarded a contract for consulting services to Kathie M. Libby, doing business as KLS. Under this contract, KLS prepared a report on morale and diversity problems in the Treasury OIG. The contract was awarded on the basis of unusual and compelling urgency following limited competition. Again, GAO concludes that the justifications for limiting the competition were not reasonable. GAO also identified a pattern of careless management in the procurement process and in oversight of performance under the contract. GAO summarized this report in testimony before Congress; see: Inspectors General: Concerns About Advisory and Assistance Service Contracts, by Robert P. Murphy, General Counsel, before the Permanent Subcommittee on Investigations, Senate Committee on Appropriations. T-OSI/AIMD-98-28, October 31, 1997.

GAO noted that: (1) shortly after her confirmation as Inspector General, Ms. Lau notified the Treasury Procurement Services Division (PSD) that she wanted Sato to perform a management review; (2) PSD awarded a sole-source management study contract to Sato on the basis of unusual and compelling urgency; (3) although Ms. Lau stated that the need to limit competition was urgent because of the need to make reassignments in the senior executive ranks and to marshal the resources needed to conduct audits, there was insufficient urgency to limit competition; (4) the price of Sato's contract for the Treasury OIG effort appears to be artificially high, in light of the fact that the firm performed a similar review of the Department of the Interior OIG for approximately $62,000 less; (5) in September 1995 PSD awarded a time-and-materials, consulting services contract to Libby to review and analyze an Office of Personnel Management (OPM) report on morale and diversity problems in the OIG office and assist OIG managers and staff concerning goals identified in the OPM study; (6) the contract was awarded on the basis of unusual and compelling urgency following limited competition; (7) the justification for limiting competition was not reasonable, since Ms. Lau could still have conveyed to her managers that the problems identified in the OPM study would be addressed and corrected those problems, had the consultant selection been delayed a few months to obtain full and open competition; (8) the largest modification made to the KLS contract was outside the scope of the contract and should have been obtained through a separate, competitive procurement; (9) GAO identified a pattern of careless management in the procurement process and in oversight of performance under the KLS contract; (10) OIG failed to fully understand and articulate its needs, resulting in a fourfold increase in the contract's total price and a 1-year extension to the period of performance; (11) OIG paid for work that was not authorized, and payments were made without verification that work had been done and without determining that travel and transportation costs documents had been received; and (12) all five of Ms. Lau's trips to California made between September 1994 and February 1997 were scheduled for work-related reasons.