Recovery Act
Contracting Approaches and Oversight Used by Selected Federal Agencies and States Gao ID: GAO-10-809 July 15, 2010The American Recovery and Reinvestment Act of 2009 (Recovery Act), estimated to cost $862 billion over 10 years, is intended to stimulate the economy and create jobs. The Recovery Act provides funds to federal agencies and states, which in turn may award contracts to private companies and other entities to carry out the purposes of the Recovery Act. Contracts using Recovery Act funds are required to be awarded competitively to the maximum extent practicable. GAO was asked to examine the use and oversight of noncompetitive Recovery Act contracts at the federal and state levels. GAO determined (1) the extent that federal contracts were awarded noncompetitively; (2) the reasons five selected federal agencies (the Departments of Defense, Energy, and Health and Human Services; the National Aeronautics and Space Administration; and the Small Business Administration (SBA)) awarded noncompetitive contracts; (3) the oversight these agencies and their inspectors general (IG) provide for Recovery Act contracts; and (4) the level of insight five selected states (California, Colorado, Florida, New York, and Texas) have into the use of noncompetitive Recovery Act contracts.
More than two-thirds of the $26 billion obligated for Recovery Act federal contract actions through May 2010 were on contracts that were in place before the enactment of the Recovery Act. Most of these contracts had been awarded competitively. For new federal Recovery Act contract actions, 89 percent of the dollars were obligated on competed actions. Most of the Recovery Act dollars obligated noncompetitively on new contract actions went to socially and economically disadvantaged small businesses under SBA's 8(a) program. The goal of using Recovery Act funds quickly on high-priority projects drove the contracting approaches of the five federal agencies, particularly their use of existing contracts. Officials explained that whether an existing contract had been competed originally did not influence the decision to use a pre-existing contract because the level of competition had been established before Recovery Act funds were available. The selected federal agencies implemented additional review processes, internal reporting, and coordination efforts for the Recovery Act. Some IGs for these agencies focused initial Recovery Act oversight on areas the IGs considered to be higher risk than contracts, such as grant programs. The IG reviews to date have not focused specifically on contracting, including the use of noncompetitive awards to 8(a) program businesses. GAO's recent reviews of the 8(a) program, however, have found that safeguards for ensuring that only eligible firms receive 8(a) contracts may not be working as intended. The five states varied on the type and amount of data routinely collected on noncompetitive Recovery Act contracts. GAO could not determine the full extent to which such contracts are being used. The states generally rely on their pre-Recovery Act contracting policies and procedures, which generally require competition. The states do not routinely provide state-level oversight of contracts awarded at the local level, where a portion of Recovery Act contracting occurs. Officials from the selected states' audit organizations said that if they were to address Recovery Act contracting issues, it could be done through the annual Single Audit or other reviews of programs that involve Recovery Act funds. GAO recommends that the five IGs assess the need to allocate audit resources to noncompetitive 8(a) Recovery Act contracts. The IGs concurred or had no comment.
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: John K. Needham Team: Government Accountability Office: Acquisition and Sourcing Management Phone: (202) 512-5274GAO-10-809, Recovery Act: Contracting Approaches and Oversight Used by Selected Federal Agencies and States
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Report to the Republican Leader, U.S. Senate:
United States Government Accountability Office:
GAO:
July 2010:
Recovery Act:
Contracting Approaches and Oversight Used by Selected Federal Agencies
and States:
GAO-10-809:
GAO Highlights:
Highlights of GAO-10-809, a report to the Republican Leader, U.S.
Senate.
Why GAO Did This Study:
The American Recovery and Reinvestment Act of 2009 (Recovery Act),
estimated to cost $862 billion over 10 years, is intended to stimulate
the economy and create jobs. The Recovery Act provides funds to
federal agencies and states, which in turn may award contracts to
private companies and other entities to carry out the purposes of the
Recovery Act. Contracts using Recovery Act funds are required to be
awarded competitively to the maximum extent practicable.
GAO was asked to examine the use and oversight of noncompetitive
Recovery Act contracts at the federal and state levels. GAO determined
(1) the extent that federal contracts were awarded noncompetitively;
(2) the reasons five selected federal agencies (the Departments of
Defense, Energy, and Health and Human Services; the National
Aeronautics and Space Administration; and the Small Business
Administration (SBA)) awarded noncompetitive contracts; (3) the
oversight these agencies and their inspectors general (IG) provide for
Recovery Act contracts; and (4) the level of insight five selected
states (California, Colorado, Florida, New York, and Texas) have into
the use of noncompetitive Recovery Act contracts.
What GAO Found:
More than two-thirds of the $26 billion obligated for Recovery Act
federal contract actions through May 2010 were on contracts that were
in place before the enactment of the Recovery Act. Most of these
contracts had been awarded competitively. For new federal Recovery Act
contract actions, 89 percent of the dollars were obligated on competed
actions, as shown in the figure.
Figure: Recovery Act Obligations on Existing and New Federal Contract
Actions as of May 12, 2010 (Dollars in Millions):
[Refer to PDF for image: pie-chart and subchart]
Contract obligations:
Existing contracts: 68%;
New contracts: 32%:
- Competed: 89%;
- Noncompeted: 11%.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Most of the Recovery Act dollars obligated noncompetitively on new
contract actions went to socially and economically disadvantaged small
businesses under SBA‘s 8(a) program.
The goal of using Recovery Act funds quickly on high-priority projects
drove the contracting approaches of the five federal agencies,
particularly their use of existing contracts. Officials explained that
whether an existing contract had been competed originally did not
influence the decision to use a pre-existing contract because the
level of competition had been established before Recovery Act funds
were available.
The selected federal agencies implemented additional review processes,
internal reporting, and coordination efforts for the Recovery Act.
Some IGs for these agencies focused initial Recovery Act oversight on
areas the IGs considered to be higher risk than contracts, such as
grant programs. The IG reviews to date have not focused specifically
on contracting, including the use of noncompetitive awards to 8(a)
program businesses. GAO‘s recent reviews of the 8(a) program, however,
have found that safeguards for ensuring that only eligible firms
receive 8(a) contracts may not be working as intended.
The five states varied on the type and amount of data routinely
collected on noncompetitive Recovery Act contracts. GAO could not
determine the full extent to which such contracts are being used. The
states generally rely on their pre-Recovery Act contracting policies
and procedures, which generally require competition. The states do not
routinely provide state-level oversight of contracts awarded at the
local level, where a portion of Recovery Act contracting occurs.
Officials from the selected states‘ audit organizations said that if
they were to address Recovery Act contracting issues, it could be done
through the annual Single Audit or other reviews of programs that
involve Recovery Act funds.
What GAO Recommends:
GAO recommends that the five IGs assess the need to allocate audit
resources to noncompetitive 8(a) Recovery Act contracts. The IGs
concurred or had no comment.
View [hyperlink, http://www.gao.gov/products/GAO-10-809] or key
components. For more information, contact John Needham, 202-512-4841,
NeedhamJK1@GAO.GOV.
[End of section]
Contents:
Letter:
Background:
Federal Agencies Largely Used Existing Contracts and Awarded Most New
Recovery Act Contracts Competitively:
Selected Federal Agencies Focused On Expediency When Choosing
Contracting Approaches for Recovery Act Programs:
Federal Agencies Provided Varying Degrees of Additional Contract
Oversight, While IGs Focused On Higher-Risk Areas:
Selected States Vary In Their Level of Insight into Noncompetitive
Recovery Act Contracts:
Conclusions:
Recommendation for Executive Action:
Agency and State Comments and Our Evaluation:
Appendix I: Federal Agencies' Obligations on Competitive and
Noncompetitive Recovery Act Contract Actions as of May 2010:
Appendix II: Key Recovery Act Programs, Spending, Contract File Review
Observations, and Oversight for Selected Agencies:
Appendix III: Objectives, Scope, and Methodology:
Appendix IV: Comments from the Department of Defense Inspector General:
Appendix V: Comments from the Department of Energy Inspector General:
Appendix VI: Comments from the National Aeronautics and Space
Administration Inspector General:
Appendix VII: Comments from the Small Business Administration:
Appendix VIII: Comments from the State of Florida:
Appendix IX: Comments from the State of Texas:
Appendix X: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Funds Provided to Selected Agencies' IGs under the Recovery
Act:
Table 2: DOD Recovery Act Funds Allocation:
Table 3: Examples of Noncompetitive Recovery Act Contract Actions from
the DOD USACE Sacramento Site Review:
Table 4: DOE Recovery Act Funds Allocation:
Table 5: Examples of Noncompetitive Contract Actions from the DOE
Environmental Management Consolidated Business Center Site Review:
Table 6: HHS Recovery Act Funds Allocation:
Table 7: Examples of Noncompetitive Recovery Act Contract Details from
the HHS NIH Site Review:
Table 8: NASA Recovery Act Funds Allocation:
Table 9: Examples of Noncompetitive Recovery Act Contract Details from
the NASA JSC Site Review:
Table 10: SBA Recovery Act Funds Allocation:
Table 11: Examples of Noncompetitive Recovery Act Contract Details
from the SBA Office of Business Operations Site Review:
Figures:
Figure 1: Recovery Act Obligations on Existing and New Federal
Contract Actions as of May 12, 2010 (Dollars in Millions):
Figure 2: Recovery Act Obligations by Fiscal Year Quarter:
Figure 3: DOD Obligations of Recovery Act Funds through Contracts, by
Fiscal Quarter:
Figure 4: DOD Recovery Act Obligations on New and Existing Federal
Contracts by Extent of Competition as of May 12, 2010 (Dollars in
Millions):
Figure 5: DOE Obligations of Recovery Act Funds through Contracts, by
Fiscal Quarter:
Figure 6: DOE Recovery Act Obligations on New and Existing Federal
Contracts by Extent of Competition as of May 12, 2010 (Dollars in
Millions):
Figure 7: HHS Obligations of Recovery Act Funds through Contracts, by
Fiscal Quarter:
Figure 8: Percentage of HHS Obligations Competed and Types of
Noncompetitive Actions as of May 12, 2010 (Dollars in Millions):
Figure 9 : NASA Obligations of Recovery Act Funds through Contracts,
by Fiscal Quarter:
Figure 10: NASA Recovery Act Obligations Competed and Types of
Noncompetitive Actions as of May 12, 2010 (Dollars in Millions):
Figure 11: SBA Obligations of Recovery Act Funds through Contracts, by
Fiscal Quarter:
Figure 12: SBA Recovery Act Obligations Competed and Types of
Noncompetitive Actions as of May 12, 2010 (Dollars in Millions):
Abbreviations:
DOD: Department of Defense:
DOE: Department of Energy:
FAR: Federal Acquisition Regulation:
FPDS-NG: Federal Procurement Data System--Next Generation:
HHS: Department of Health and Human Services:
IDIQ: Indefinite Delivery/Indefinite Quantity:
IG: Inspector General:
JSC: Johnson Space Center:
NASA: National Aeronautics and Space Administration:
NIH: National Institutes of Health:
OMB: Office of Management and Budget:
ORAC: Office of Recovery Act Coordination:
OSD: Office of the Secretary of Defense:
SBA: Small Business Administration:
USACE: U.S. Army Corps of Engineers:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 15, 2010:
Honorable Mitch McConnell:
Republican Leader United States Senate:
Dear Senator McConnell:
Congress enacted the American Recovery and Reinvestment Act of 2009
(Recovery Act)[Footnote 1] to help stimulate the United States economy
by providing an estimated $862 billion over 10 years through a variety
of programs. A portion of those funds is being provided directly to
federal agencies, which may award contracts and grants for their
respective programs. Another portion of Recovery Act funds is being
provided directly to the states, which in turn may award contracts or
grants to businesses or local governments. As of May 2010, $26 billion
of Recovery Act funds had been obligated on contracts awarded by
federal agencies. The Recovery Act provides that to the maximum extent
practicable, federal agencies' contracts should be awarded
competitively with fixed prices. Federal agencies and their inspectors
general (IG) were provided funding under the Recovery Act to audit the
act's programs and projects, including grant and contract awards.
States generally are expected to use competition to the extent
practicable when awarding contracts using federal funds. The benefits
of competition are well-established. It saves taxpayer money, helps
improve contractor performance, and promotes accountability for
results.
You asked us to examine the use and oversight of noncompetitive
contracts[Footnote 2] awarded under the Recovery Act at the federal
and state levels. In response, we determined (1) the extent of
Recovery Act funding obligated by federal agencies on contracts, and
the extent to which these contracts were awarded noncompetitively, (2)
the reasons selected federal agencies awarded noncompetitive Recovery
Act contract actions, (3) the extent of oversight of Recovery Act
contracting at selected federal agencies, and (4) state officials'
level of insight into and oversight of the use of noncompetitive
Recovery Act contracts within selected states. This report first
addresses each of these objectives, and then provides additional data
on federal Recovery Act contracting governmentwide in appendix I and
more detailed information about the approaches taken by selected
federal agencies in appendix II.
To determine the extent to which contracts using Recovery Act funds
are being awarded noncompetitively by federal agencies, we analyzed
governmentwide data from the Federal Procurement Data System--Next
Generation (FPDS-NG).[Footnote 3] We determined that the FPDS-NG data
were sufficiently reliable for the purposes of this review by
comparing the information for selected agencies with information from
other sources, including agency contract data and information in
contract files at selected locations.[Footnote 4] To determine the
reasons that Recovery Act contracts are at times not competed, we
selected five agencies at which we discussed the use of noncompetitive
contracts and reviewed about 150 noncompetitive Recovery Act contract
actions--new contracts as well as orders on and modifications to
previously awarded contracts. We selected these agencies based on the
number, value, and percentage of noncompetitive Recovery Act actions
and obligations. Four agencies--the Departments of Defense (DOD),
Energy (DOE), and Health and Human Services (HHS), and the National
Aeronautics and Space Administration (NASA)--are the four agencies
that obligated the most Recovery Act funds using noncompetitive
contracts. The fifth agency--the Small Business Administration (SBA)--
had a relatively low amount of noncompetitive Recovery Act actions and
obligations but provided an example of how a smaller agency carried
out Recovery Act contract awards. At each agency, we reviewed all
Recovery Act contract actions awarded noncompetitively at a particular
contracting office, generally the one with the largest volume of
noncompetitive actions, to identify the reason each action was not
competed and the extent to which the reason was explained in the
contract file. To determine the extent of Recovery Act contracting
oversight provided by the selected federal agencies and their
respective IGs, we interviewed agency officials, including IG staff,
and reviewed their oversight plans and resulting reports.
To determine the level of insight that state officials have into the
use of noncompetitive Recovery Act contracts, we selected five states--
California, Colorado, Florida, New York, and Texas--based on the
amount of Recovery Act funds reported as being awarded via contracts
on www.Recovery.gov and our goal of providing information on a variety
of geographic locations.[Footnote 5] For each state, we discussed with
the appropriate state officials--including representatives from the
governors' offices, state procurement offices, and audit organizations-
-the extent to which the state has awarded noncompetitive Recovery Act
contracts, the reasons why the state did not use competition, and the
level of oversight the state provides for these contracts.
Additionally, we discussed these issues with representatives of the
state agencies that manage the education and weatherization programs,
to obtain further understanding of how state agencies award and
oversee contracts. Because a large portion of the Recovery Act funds
received by the states is in the form of grants, which are further
distributed by the states to local governmental entities, we discussed
the extent of oversight the state provided over contracts awarded by
local governmental entities.[Footnote 6] We also attempted to identify
a statewide data source or database for sampling and evaluating state-
awarded contracts with respect to competition, but were unable to
identify such a data source or database for any of the states in our
review. As a result, we relied primarily on testimonial evidence
provided by state officials. Details on our scope and methodology are
contained in appendix III.
We conducted this performance audit from February 2010 to July 2010,
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
The Recovery Act was enacted on February 17, 2009, to help stimulate
the United States economy by creating new jobs, as well as saving
existing ones, and investing in projects that will provide long-term
economic benefits. The Recovery Act requires that the President and
heads of the federal agencies manage and expend Recovery Act funds to
achieve the act's purposes as quickly as possible and consistent with
prudent management. In addition, the Recovery Act requires contracts
funded under the act to be awarded as fixed-price contracts through
the use of competitive procedures to the maximum extent possible. The
Office of Management and Budget (OMB) issued guidance for implementing
the Recovery Act and meeting "crucial accountability objectives" of
the act, including, for example: timely awarding of Recovery Act
funds; reporting on the use and public benefit of those funds; and
ensuring that those funds are used for authorized purposes while
mitigating the potential for fraud, waste, error, and abuse.[Footnote
7]
In addition to these objectives, OMB supplemental guidance also
provides other goals that agencies are to consider when using Recovery
Act funds.[Footnote 8] Among those goals are investing in efforts that
will provide jobs and have long-term public benefits, promoting local
hiring, providing maximum practicable opportunities for small
businesses, and supporting disadvantaged businesses. The guidance also
identifies activities agencies should consider to mitigate risks,
including determining what contract award methods will allow
recipients to commence expenditures and activities as quickly as
possible; providing oversight for non-fixed-price contracts that may
be riskier to the government; and reviewing internal procurement rules
to promote competition to the maximum extent practicable.
Federal agencies using Recovery Act funds on contracts must take a
number of new steps related to the solicitation of offers and award of
contracts. For instance, to enhance the transparency to the public,
the Federal Acquisition Regulation (FAR) was amended to require
federal agencies to publicize on www.fedbizopps.gov contract actions
that will be funded by the Recovery Act. The description on the Web
site of the supplies and services should be clear and unambiguous to
support public understanding of the procurement. After awarding a
contract using other than fixed-price or competitive approaches,
federal agencies are also required to publicize the rationale for
doing so on the Web site. In addition, federal agencies should use
specific codes when entering Recovery Act contract actions into FPDS-
NG to indicate that Recovery Act funds are being used, in whole or in
part. The FAR was also amended to implement the Recovery Act
requirements that: only American-produced iron, steel, and
manufactured goods be used in Recovery Act construction projects;
access be provided for Comptroller General and IG audits and reviews
of Recovery Act contracts and subcontracts; and whistleblower
protections be provided. The act also requires the payment of at least
locally prevailing wages to contractor employees working on Recovery
Act projects, in accordance with the Davis-Bacon Act.
Federal agencies are generally required to obtain full and open
competition through competitive procedures when awarding government
contracts, unless an exception to competition applies. Some authorized
exceptions include when:
* the supplies or services needed by the agency are available from
only one responsible source and no other supplies or services will
satisfy the agency's needs;
* the agency's need for the supplies or services is of such an unusual
and compelling urgency that there would be serious injury if the
agency were not permitted to limit the number of sources; or:
* a statute expressly authorizes that the acquisition be made through
another agency or from a specified source, such as SBA's 8(a) program.
[Footnote 9]
In most cases, the use of noncompetitive contracting procedures must
be properly justified in writing and certified by the appropriate
agency official. The competition requirements that apply to federal
agencies do not apply to the states, each of which has its own
contract competition requirements.
Additionally, purchases of supplies or services that are under certain
dollar thresholds (usually from $3,000 to $100,000) may be acquired
through the use of simplified acquisition procedures. These procedures
provide a streamlined approach to procurements as a way to promote
efficiency and economy in contracting. While full and open competition
procedures do not apply to simplified acquisitions, federal agencies
are still required to promote competition to the maximum extent
practicable. When using simplified acquisition procedures, federal
agencies can solicit from one source if they determine that only one
source is reasonably available.
Section 8(a) of the Small Business Act authorizes SBA to create a
business development program to help small, socially and economically
disadvantaged businesses compete in the American economy, including
gaining access to the federal procurement market. This program, known
as the 8(a) program, authorizes contracting by using procedures other
than full and open competition, such as awarding sole-source
contracts. Under the 8(a) program, when the anticipated value of a
contract is below the "competitive threshold"--$5.5 million for
acquisitions involving manufacturing and $3.5 million for all other
acquisitions--the contract should be awarded on a sole-source basis to
an eligible 8(a) business.[Footnote 10] Contracts above the
competitive thresholds can be awarded based on competition limited
only to 8(a) businesses when there is a reasonable expectation that at
least two 8(a) businesses will submit offers. Sole-source contracts of
any value may be awarded to businesses owned by an eligible Indian
tribe or an Alaska Native Corporation. Federal agencies are not
required to provide written justification for sole-source contracts
awarded under the 8(a) program, but regulations specify percentages of
the work that must be performed by the 8(a) business with its own
resources. The OMB Recovery Act implementing guidance encourages
federal agencies to take advantage of authorized small business
contracting programs, which may include the use of noncompetitive
contracts, to create opportunities for small businesses.[Footnote 11]
The Recovery Act provided an unprecedented level of funding for
programs to be administered within the states at various levels.
Recovery Act funds are being distributed to states, local entities,
and individuals through a combination of formula and competitive
grants and direct assistance. Nearly half of the approximately $580
billion associated with Recovery Act spending programs will flow to
states and localities through about 50 state formula and discretionary
grant programs as well as about 15 entitlement and other programs.
Some of the funds are passed from the federal agencies through state
governments to local governments, while other funds are provided
directly to local governments or individuals by the federal agencies.
As we previously reported, states are taking various approaches to
ensure that internal controls are in place to manage risk up front,
rather than after problems develop and deficiencies are identified.
[Footnote 12] States have different capacities to manage and oversee
the use of Recovery Act funds. Many of these differences result from
the underlying differences in approaches to governance, organizational
structures, and related systems and processes that are unique to each
jurisdiction. To provide state-level oversight of the use of Recovery
Act funds, many states appointed an individual or team, often in the
governor's office, to provide overarching guidance and monitoring for
the state's Recovery Act efforts. Since many of the programs and the
processes and procedures used to implement them existed before the
Recovery Act funds were provided, much of the focus of the state-level
oversight efforts has been on the new aspects of the Recovery Act,
such as the new recipient reporting requirements and state fiscal
stabilization funds.
Federal Agencies Largely Used Existing Contracts and Awarded Most New
Recovery Act Contracts Competitively:
More than two-thirds of the $26 billion that had been obligated on
federal contracts through May 2010 was obligated on contracts that
were already in place before the Recovery Act. Agencies used
mechanisms such as task orders for services, delivery orders for
supplies, and contract modifications to add work or funds to existing
contracts. For these orders and modifications on existing contracts,
the decisions to compete or not compete the underlying contracts
predated the Recovery Act. About 89 percent of the Recovery Act funds
obligated on pre-existing contracts were coded in FPDS-NG as being
competed.
Approximately one-third of Recovery Act federal contract obligations
through May 2010 was obligated on new contracts. For these contracts,
the decisions on whether to compete the contracts were made after the
Recovery Act was enacted. As shown in figure 1, most Recovery Act
dollars obligated on new federal contracts were on contracts that were
competed. The new contracts that were not competed consisted of
contracts awarded under the SBA's 8(a) program, contracts awarded
using simplified acquisition procedures, and other contracts that were
awarded under authorized exceptions to competition, such as only one
source was available or the requirement was urgently needed. Almost 80
percent of the approximately $875 million obligated to noncompetitive
new contracts went to businesses under SBA's 8(a) program.
Figure 1: Recovery Act Obligations on Existing and New Federal
Contract Actions as of May 12, 2010 (Dollars in Millions):
[Refer to PDF for image: pie-chart and subchart]
Contract obligations:
Existing contracts: 68%;
New contracts: 32%:
* Competed: 89%;
* Noncompeted: 11%:
- (a) program sole source: $686 million;
- Other: $74 million;
- Sole or unique source: $55 million;
- Urgency: $45 million;
- Simplified acquisition procedures: $15 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Between both existing and new contracts, almost 90 percent of the $26
billion in Recovery Act contracting dollars through May 2010 were
obligated on competitive contract actions. See appendix I for detailed
data on the obligations placed on Recovery Act contract actions by all
federal agencies.
Selected Federal Agencies Focused On Expediency When Choosing
Contracting Approaches for Recovery Act Programs:
Officials at the five federal agencies we reviewed told us that they
chose their contracting approaches to meet their primary goals of
obligating Recovery Act funds quickly and to high-priority projects,
which sometimes led to using noncompetitive contract actions. The act
and guidance from OMB and agency officials directed agencies to
obligate Recovery Act funds quickly, creating a sense of urgency on
the part of contracting staff. As a result, program and contracting
staff identified programs, projects, and contract vehicles that would
allow them to obligate funds within short time frames. Contracting
officials at some of the agencies we visited told us that they
considered both the relative risks of using noncompetitive contracting
approaches and the benefits of obligating funds faster than had they
awarded new contracts using full and open competition. For example,
the U.S. Army Corps of Engineers (USACE) chose construction projects
that could be executed quickly by issuing task orders under previously
awarded contracts with businesses under SBA's 8(a) program. Further,
contracting officials at USACE also noted that new sole-source
contracts to 8(a) businesses typically take about 4 months to award,
[Footnote 13] while a new competitive contract could take 12 to 14
months using full and open competition procedures. As shown in figure
2, most of the Recovery Act funds were obligated within the first two
full fiscal quarters in which the funds were available for obligation.
Figure 2: Recovery Act Obligations by Fiscal Year Quarter:
[Refer to PDF for image: vertical bar graph]
Fiscal year quarter: Q3 FY09;
Obligations of Recovery Act Funds through Contracts: $7.13 billion.
Fiscal year quarter: Q4 FY09;
Obligations of Recovery Act Funds through Contracts: $9.64 billion.
Fiscal year quarter: Q1 FY10;
Obligations of Recovery Act Funds through Contracts: $2.78 billion.
Fiscal year quarter: Q2 FY10;
Obligations of Recovery Act Funds through Contracts: $4.86 billion.
Fiscal year quarter: Q3 FY10;
Obligations of Recovery Act Funds through Contracts: $1.58 billion.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Officials at several of the selected federal agencies explained that
the use of existing contracts allowed them to obligate funds quickly.
Whether an existing contract had been competed originally did not
influence decisions about which of these contracts to use since the
level of competition had already been established prior to the
availability of Recovery Act funds. According to agency officials,
programmatic priorities and the availability of contracts with the
capacity to absorb and effectively use additional funding were the
predominant factors in choosing which existing contracts received
Recovery Act funds. Use of the 8(a) program to award new contracts
allowed agencies to quickly obligate funds without competition as sole-
source awards. For certain 8(a) contracts, such as those below $3.5
million, sole-source is the default contracting approach under federal
regulations.[Footnote 14] Contracting officials at each of the federal
agencies told us that the 8(a) program allowed them to quickly
obligate funds on both new and existing contracts under $3.5 million
and that the noncompetitive nature of the contracts was viewed as a
trade-off for expediency and the ability to provide opportunities to
small businesses.
While speed was the primary driver agencies cited for using
noncompetitive contracting approaches, noncompetitive awards were also
used in a small number of new contracts that we reviewed when there
was only one source available for specialized equipment or a specific
service. For example, several National Institutes of Health (NIH)
contract actions we reviewed were sole-source contracts for
specialized medical equipment. In these cases, there was only one
manufacturer that could meet the requirements of the contract
according to the documentation in the contract files.
At the five selected agencies, we found that all of the new
noncompetitive Recovery Act contracts that required documented
justification and approval for using other than full and open
competition had such documentation. For most new noncompetitive
Recovery Act contracts, specific documentation to justify the
noncompetitive award was not required. However, we found that 21 of
the new contracts awarded as of February 2010 at the five agencies we
visited required documented justifications.[Footnote 15] For these 21
contracts, the contract files included the required justification and
approval documentation for not using full and open competition. Almost
all of the justifications we reviewed authorized a sole-source
contract because there was only one responsible source and no other
type of supplies of services would satisfy the agency's requirements.
Among these, about half were for purchases of proprietary parts or
technology, and most of the others were contracts for utility services.
Federal Agencies Provided Varying Degrees of Additional Contract
Oversight, While IGs Focused On Higher-Risk Areas:
The selected agencies added additional review processes, internal
reporting, and coordination steps in response to the Recovery Act.
While the measures implemented vary at each of the selected agencies,
all have created additional processes to increase management oversight
beyond their normal practices. IGs used a risk-based approach to
target their initial oversight efforts, and did not specifically
target noncompetitive contract actions because IGs did not view them
as high risk. At most of the selected agencies, IGs chose to focus on
areas and programs they judged to be higher risk, such as grant
programs, which accounted for the majority of Recovery Act funding.
Alongside IG's individual efforts, the Recovery Act also established
the Recovery Accountability and Transparency Board to coordinate among
the IGs and provide additional oversight.[Footnote 16]
Selected Federal Agencies Implemented Varying Degrees of Additional
Oversight for Contracts Awarded under the Recovery Act:
The selected agencies used existing processes to award and administer
Recovery Act contracts, but they also implemented a number of
additional measures intended to provide enhanced oversight. This added
oversight was in response to the specific requirements of the Recovery
Act and implementing guidance from OMB for greater transparency,
speedy execution of projects, maximizing competition in contracting,
and other priorities.[Footnote 17] According to agency officials,
additional oversight measures were put in place at the agencywide
level, as well as within the agency components that we reviewed.
All five of the selected agencies created working groups, committees,
or other internal entities with the mission of coordinating each of
the agency's Recovery Act work. Most of these groups deal with a wide
range of Recovery Act-related implementation issues and included
oversight of contracting as one element of their work. Generally,
officials said that they meet on a regular basis--such as monthly or
weekly--and provide a venue for officials from across the agencies to
provide management visibility into Recovery Act programs, discuss
problems that may have arisen, and coordinate approaches by issuing
formal or informal guidance. For example, DOD created the Recovery Act
Working Group to coordinate implementation across the department. At
weekly meetings, representatives from the Office of the Secretary of
Defense and the military services provide updates on the status of
Recovery Act obligations, projects in progress, relevant IG findings,
and other issues. Further, similar Recovery Act coordinating groups
are in place within each of the military services.
In addition to their primary Recovery Act coordination groups, some
agencies also created additional subgroups to coordinate specific
aspects of implementation and oversight, such as contracting. For
example, HHS established an Office of Recovery Act Coordination to
work across the entire agency. As part of that function, HHS
established a Recovery Act Coordinators group to hold weekly meetings
of key personnel from the various agency operating divisions, allowing
centralized collection and distribution of management information.
Most agencies reported that they also identified a single individual
to take managerial responsibility for implementation and oversight of
Recovery Act programs. For example, NASA created the Recovery Act
Implementation Executive position responsible for coordinating
activities throughout the agency related to the administration of
Recovery Act programs. Likewise, at DOD, the Principal Deputy Under
Secretary of Defense in the Comptroller's office leads the Recovery
Act Working Group and is responsible for ensuring that the military
services are properly administering their Recovery Act-funded programs.
Although the selected agencies reported that they awarded Recovery Act
contracts through their standard contracting processes, one agency
implemented additional pre-award reviews of contract actions.
According to NIH officials, NIH implemented an increased review of
contracts awarded noncompetitively, which allowed greater visibility
into Recovery Act contracts. Typically, NIH management reviews any
noncompetitive contract award over $550,000, but NIH procedures for
the Recovery Act require management review of all proposed
noncompetitive contracts prior to award. Across the five federal
agencies, some provided additional review in other ways, such as
reviews of selected projects prior to the contract award process. See
appendix II for additional details on each agency.
Agencies increased the amount of internal reporting of Recovery Act
activities, including contracting. In combination with the
coordination groups discussed above, this internal reporting was
intended to create greater visibility for Recovery Act programs.
Agencies increased the amount of data provided directly to agency
leadership on contract awards, as well as the frequency at which these
data are updated. For example, DOE expanded an existing data system to
provide more frequent reporting and performance information to a
larger number of users as part of its approach to Recovery Act
oversight. The system includes regularly updated financial, earned
value management,[Footnote 18] performance, risk, and job creation
data on DOE projects, which are available to agency officials directly
and through daily summary reports. Within DOD, USACE established a
weekly report to agency leadership on Recovery Act contracting
activity, showing obligations, project status, and other information.
The additional oversight processes and increased volume of funding
under the Recovery Act have put added demands on agency contracting
staff, which agency officials said was having some impact on their
ability to carry out their missions. The Recovery Accountability and
Transparency Board coordinated a survey administered by IGs of
contracting and grant officials at 29 agencies regarding the adequacy
of contracting and grant staffing levels.[Footnote 19] Some survey
respondents said that staffing was inadequate, while about half of
respondents said that staffing was adequate to meet Recovery Act needs
but affected non-Recovery Act work. Contracting officials at several
agencies whom we met with in our site reviews also reported that there
had been an impact on their staff. Officials said that staff had put
in extra hours to meet Recovery Act demands, and in one case said that
attention to Recovery Act contracts had led to delays on non-Recovery
Act contract awards.
Most IGs for the Selected Agencies Did Not Focus on Contracts Because
Other Areas Were Deemed Higher Risk:
The Recovery Act provided supplemental funding to IGs to support their
oversight of their agencies' spending under the act. Table 1 shows the
funding provided to the IGs for the five selected agencies.
Table 1: Funds Provided to Selected Agencies' IGs under the Recovery
Act:
IG Office: Department of Defense;
Recovery Act funding received: $15.0 million;
Recovery Act funding spent as of April 2010: $3.7 million.
IG Office: Department of Energy;
Recovery Act funding received: $15.0 million;
Recovery Act funding spent as of April 2010: $1.3 million.
IG Office: National Aeronautics and Space Administration;
Recovery Act funding received: $2.0v;
Recovery Act funding spent as of April 2010: $0.45 million.
IG Office: Department of Health and Human Services;
Recovery Act funding received: $17.0 million;
Recovery Act funding spent as of April 2010: $4.53 million.
IG Office: Small Business Administration;
Recovery Act funding received: $10.0v;
Recovery Act funding spent as of April 2010: $0.96 million.
Source: GAO summary of data provided by the IGs of DOD, DOE, HHS,
NASA, and SBA.
[End of table]
IGs for the selected agencies reported that they used assessments of
the relative risks, specific to their agencies and programs, of
different Recovery Act activities to target their oversight efforts.
At three of the five IG offices, these assessments did not result in a
focus on contracting. The IGs for all five agencies reported that they
used a risk-based approach to structuring their Recovery Act oversight
work, but each considered different factors in assessing risk. They
all said that the amount of Recovery Act funding received by their
agency was a main factor in their focusing on program areas or
projects receiving the greatest funding. Most Recovery Act spending
was through grants not contracts. Other risk factors used by some of
the IGs included problems identified in previous audit work, the level
of experience of grant recipients, and contract characteristics such
as the level of competition and whether the contract was new or
existing. At three of the IG offices, the assessment results showed
that Recovery Act contracting was an area of lower risk relative to
Recovery Act spending through grants and loans. These offices devoted
only a small portion of their Recovery Act audit work toward it. For
example, HHS IG officials said that they focused on the agency's grant
programs, in large part because the amount of Recovery Act funding to
be spent by HHS through grants was much greater than the amount to be
spent through contracts.[Footnote 20] In addition, the HHS IG's prior
findings showed grants to be a higher-risk area. The officials said
that they also took into account the risks posed by increased funding
under the Recovery Act. For example, an HHS IG official said that they
anticipated that some grant recipients would have little prior
experience with federal funds. As a result of this risk assessment,
the HHS IG conducted only limited work on contracts. This work
involved two reviews that looked at administrative approvals and
funding for a selection of contracts at NIH, and concluded that no
further reviews were needed. The IGs review their Recovery Act audit
plans periodically, generally on a semiannual basis, and revise them
as warranted.
Contracting under the 8(a) program was not a focus for four of the
five IGs, who did not use the 8(a) status of a business as a factor in
their selection of contracts for review, and did not review 8(a)
compliance issues, such as 8(a) eligibility or limits on the amount of
work that can be subcontracted. The DOE IG and HHS IG did not review
issues related to 8(a) contracts as a result of their risk
assessments, because they did not identify contracting as a high-risk
area. DOD IG and NASA IG officials said that they did not focus on
issues related to 8(a) contracts beyond the 8(a) contracts they
encountered in performing their programmatic reviews, and did not
review 8(a) business compliance and eligibility. The eligibility
determination is an issue that is within the sole purview of SBA. The
SBA IG did review some 8(a) contracts and looked into the reasons
specific businesses were chosen. In one of the SBA IG reviews, the
resulting report did address the eligibility of two 8(a) businesses
and determined that one of the two businesses was not eligible for the
contract award under the 8(a) program rules.[Footnote 21]
We recently reviewed the process SBA uses to ensure that 8(a)
businesses remain eligible to continue participating in the program,
and found inconsistencies and weaknesses in the required annual review
procedures.[Footnote 22] For example, we estimated that SBA staff at
five district offices failed to complete the required review for 55
percent of 8(a) businesses. In a separate review, we recently found
that $325 million in set-aside and sole-source contracts were awarded
to businesses that were not eligible to participate in the program.
[Footnote 23] We also have identified issues with respect to the use
of 8(a) businesses that qualify as Alaska Native Corporations.
[Footnote 24] Specifically, we have found that agencies have not
always complied with requirements to notify SBA when 8(a) contracts
with Alaska Native Corporations are modified, or to ensure that the
businesses comply with limits on subcontracting.
In contrast to the other three IGs, the DOD IG and NASA IG included
reviews of individual contracts as a central part of their oversight.
According to DOD IG officials, they chose their approach as a result
of their risk analysis. The majority of the department's Recovery Act
spending is through contracts for building construction and
renovation. DOD IG officials analyzed data on the services' planned
projects and decided which ones to review based primarily on the size,
location, and type of project. The DOD IG with the assistance of the
military services' audit agencies--the Army Audit Agency, the Air
Force Audit Agency, and the Naval Audit Service--conducted coordinated
reviews of the projects identified through the initial risk analysis.
As part of those reviews, auditors gathered additional information on
contract actions for the selected projects, including whether they
were issued as orders or modifications under existing contracts,
whether the contracts were competitively awarded, and whether a
surveillance plan was in place. In addition, the DOD IG and military
services' audit agencies collected information on whether contracts
for the projects they reviewed were awarded to 8(a) businesses, but
the officials said that they did not assess business eligibility
because this falls under the jurisdiction of the office within SBA
that administers the 8(a) program. However, DOD IG officials told us
that if they suspect that a business is not eligible for the 8(a)
program, they refer the matter to SBA for review. The only audit work
that directly focused on 8(a) businesses, other than the work of the
SBA IG noted above, is a review currently being conducted by the Air
Force Audit Agency, which is reviewing the eligibility of 8(a)
contractors at 10 Air Force installations. As of June 2010, the Air
Force Audit Agency had not yet issued its report.
As of June 2010, 141 reports had been posted on www.Recovery.gov by
the IGs for the five agencies we reviewed. In 43 of the reports, the
IGs touched on contracting issues. Of these, 27 were reviews of
projects at individual DOD facilities issued by the DOD IG or by the
military services' audit agencies. Most of the IG reports that dealt
with contracting did not identify systematic shortcomings in agency
processes or Recovery Act contracts. Rather, contracting-related
findings ranged from clauses omitted from individual contracts to
observations on the completeness of contracting data reported by the
agencies. For instance, the Air Force Audit Agency reported in its
audit of Elmendorf Air Force Base that while the base's Recovery Act
contracts met several requirements, such as expediting the award
process and fostering competition, they had not fully met transparency
requirements because the contracting office did not provide sufficient
information on the work to be completed for one project on
www.fedbizopps.gov.[Footnote 25] According to Office of the Secretary
of Defense and Air Force officials, Elmendorf Air Force Base
subsequently reposted the project on www.fedbizopps.gov to more
accurately reflect the work accomplished.
One IG report, however, noted significant shortcomings in agency
contracting workforce capacity. The SBA IG determined that staffing
levels in the agency's contracting office were insufficient.[Footnote
26] The SBA IG found that because of vacant positions, contracting
office staff declined from 13 to 7 personnel from June 2009 to
February 2010, at a time when the office's workload increased as a
result of Recovery Act implementation. The report concluded that the
current staffing of the contracting office was insufficient to award,
administer, and oversee Recovery Act and other contracts, and that as
a result, the risk of fraud, waste, and abuse had increased. In our
discussions with SBA on the report's findings, a senior procurement
official stated that the agency has experienced further attrition in
its acquisition workforce since this report was released. To address
this, the agency awarded a contract to provide acquisition services
for four contracting positions and plans to contract for services for
six more.
For further information on how the IGs at each of the selected
agencies are conducting Recovery Act oversight, see appendix II.
Selected States Vary In Their Level of Insight into Noncompetitive
Recovery Act Contracts:
At the state level, we were not able to determine the full extent of
the use of noncompetitive contracting. The states we visited collect
some aggregate data on contracts awarded by state agencies, but did
not maintain data on contracting at the local level where a portion of
the contracting activity occurs. These states rely on their pre-
Recovery Act contracting policies and procedures, which generally
require competition. With respect to oversight, each state has
supplemented its state-level guidance with some additional Recovery
Act-specific policies and procedures. However, the states do not
routinely provide state-level oversight of contracts awarded at the
local level, where a portion of the Recovery Act contracting occurs.
[Footnote 27] Representatives of the five state audit organizations
said they could address Recovery Act contracting issues through the
internal control work performed during the state's annual Single Audit
or during other reviews of programs that involve Recovery Act funds,
if contracting is identified as an area of risk.
Selected States Vary on Information Identifying Noncompetitive
Recovery Act Contracts:
State-level information on the type and amount of data routinely
collected on noncompetitive Recovery Act contracts varied in the five
states we visited--California, Colorado, Florida, New York, and Texas.
Officials in some states said they are collecting or could collect
data on noncompetitive contracts awarded by the state agencies. Some
of the states we visited currently have some level of statewide
information on noncompetitive contracts awarded by their state
agencies, but with limitations. Specifically, officials in the states
we visited told us the following:
* California's statewide contract database does not include contracts
awarded by all of its state agencies.
* Colorado's statewide contract database does not identify which
contracts are funded under the Recovery Act, but noncompetitive
Recovery Act contracts are manually reported to the state level.
* New York's statewide contract database includes contracts awarded by
state agencies, but does not include data on contracts awarded by
state authorities, such as the New York State Energy Research and
Development Authority.
* Florida has a statewide contract database, but it is voluntary and
not routinely used by all state agencies.
* Texas' statewide contract database does not identify which contracts
are funded under the Recovery Act.
Officials in California, Colorado, and Florida said that some of their
state agencies have awarded noncompetitive Recovery Act contracts,
while officials in New York said none have been awarded by their state
agencies and officials in Texas said they were not aware of any having
been awarded.
At the state agency level, we discussed the weatherization and
education programs with the respective agencies responsible for
managing these programs. In all five states, officials from these
agencies said that they have some data on Recovery Act contracts
awarded by their agencies. Moreover, state officials in all five
states explained that they are not required to provide direct
oversight of contracts awarded below the state agency level. As a
result, they do not collect data on contracts awarded at the local
levels by local governments or agencies where a portion of the
Recovery Act contracting occurs. The limitations on available contract
data, therefore, precluded us from performing an analysis on
noncompetitive Recovery Act contracts awarded in the selected states.
Selected States Require Competitive Contracting but Their Oversight
Practices Vary:
According to procurement officials in the selected states, the use of
competition is generally required when awarding contracts, although
exemptions are permitted. Each of the selected states permits
exemptions to competition when contracts are awarded to another
government entity, and most also permit exemptions when responding to
emergencies and when only one provider is available. In the selected
states in which state-level officials were aware of the award of
noncompetitive Recovery Act contracts, officials said those awards
were made between government agencies or to sole-source providers. For
example, an agency in one state contracted with a university to
provide training, and an agency in another state contracted with
businesses that were the sole providers of proprietary scientific
equipment.
Each of the five states provides oversight of the award of Recovery
Act contracts to varying degrees. According to officials, each state
uses a combination of policies and procedures that existed prior to
the Recovery Act and some additional measures to oversee these awards.
Each state supplemented its existing contracting procedures with new
guidance and had state agencies that realigned or hired staff to
implement Recovery Act requirements. State officials explained that
under existing state procedures, agencies are required to prepare
justification documentation and obtain approval before they award
noncompetitive contracts. In addition, state officials told us that
generally state agencies are responsible for oversight of contracts
their agencies award, while local entities have oversight
responsibilities for contracts awarded at the local level. For
example, Colorado officials approve local agencies' procurement
processes, but the local agencies acquire weatherization materials on
their own using a competitive bid process.
Most Recovery Act funds to local governments flow through existing
federal grant programs, while some of the funds are provided directly
to local governments by federal agencies and others are passed from
the federal agencies through state governments to local governments.
Therefore, state officials have limited insight into contracts awarded
at the local level. In California, for example, state education
officials said the size of the state and its more than 1,600 local
education entities made it impractical to track local contracts.
Nonetheless, officials in the selected states can perform postaward
reviews related to contract competition on an as-needed basis.
Officials in some of the states we visited said that they did not
receive additional resources to provide oversight of Recovery Act
funds.[Footnote 28] To provide additional oversight, they sometimes
shifted resources to handle Recovery Act work, which at times entailed
shifting resources from non-Recovery Act to Recovery Act work.
[Footnote 29]
State Audit Organizations Might Address Recovery Act Contracting
through Annual Single Audits or Program Reviews:
Representatives of the five states' audit organizations[Footnote 30]
said that their organizations could provide additional oversight of
the states' use of Recovery Act contracting funds through the internal
control work performed as part of the states' Single Audits,[Footnote
31] and some explained that this could also be done through separate
programmatic reviews if contracting is identified as an area of risk.
Although contract competition is not the singular focus of the Single
Audit, it nevertheless may be included as part of the internal control
testing for a given program. For example, funding for weatherization
programs, which increased from the pre-Recovery Act level in the
selected states, falls under the Single Audit requirements. According
to Florida state officials, their weatherization program funding
increased from about $1.3 million before the Recovery Act to an
average of $58.7 million per year over a period of 3 years. With
respect to noncompetitive contracts, the audit organizations for some
of the states we visited had not identified noncompetitive contracts
as a risk area and did not plan any audits specifically targeted at
this contracting method. Audit organization representatives in each of
the five states we visited said that they were in the process of
conducting reviews of some Recovery Act programs but the focus of
these audits is not on noncompetitive contracts; however, they also
noted that these audits could address procurement and contracting
issues should they surface during the course of the audits.
At the state level--unlike the federal level--Recovery Act funds were
not specifically set aside for state audit organizations to provide
oversight of the use of Recovery Act funds. To focus their resources,
some state audit organizations have performed risk assessments of
state agencies and are planning additional programmatic reviews. These
state audit organizations used risk assessments to identify programs
for potential review and, in some states, to maximize the use of
limited auditing resources. State audit officials told us that the
factors considered in their risk assessments included dollar values of
programs, previous audit findings, internal control weaknesses
identified as a result of the Single Audits, whether the program was
new, or whether a program received large increases in funding. As we
previously reported, recent budgeting challenges for state governments
have reduced staffing levels and audit organizations have not been
spared from budget reductions that could limit their capacity to
perform audits involving Recovery Act funds.[Footnote 32]
Conclusions:
At the federal level, available data were sufficient for us to
determine the extent to which agencies used competition for Recovery
Act contracting, the reasons selected agencies chose not to use
competition, and their approaches to contract oversight. In general,
congressional and administration direction to obligate Recovery Act
funds quickly led agencies across the government to rely heavily on
existing contract vehicles to get work under contract. Most of these
existing contracts, as well as most new contract actions, were
competitive. Federal agencies have added additional oversight
procedures, internal reporting, and coordination in response to
Recovery Act requirements.
Federal agency IGs focused their initial oversight efforts on areas
they determined to be higher risk and did not target spending under
contracts, including noncompetitive contracts. While this approach may
have been justified initially given competing priorities and the
relatively small percentage of obligations spent on noncompetitive
contract actions, the result is relatively little audit coverage of
Recovery Act contract actions under SBA's 8(a) program. This is
significant for two reasons. First, the 8(a) program accounts for the
overwhelming majority of noncompetitive contract obligations under the
Recovery Act. Second, our prior work, some of which is quite recent
and was not available to the IGs when they prepared their audit plans,
has shown that safeguards designed to ensure that the program operates
as intended--requiring checks on participant eligibility and limits on
subcontracting--are not always implemented effectively. While we
recognize that the Recovery Act guidance encourages contracting with
small businesses, there is an opportunity for the IGs to reassess
whether they need to focus additional audit resources on contracting
under the 8(a) program, which accounts for nearly 80 percent of the
new noncompetitive contract actions under the Recovery Act.
At the state level, we were not able to determine the full extent of
the use of noncompetitive contracting. The five states we visited
collected some aggregate data on contracts awarded by state agencies,
but did not maintain data on contracting at the local level where a
portion of the contracting activity occurs. As a result, we could not
analyze the extent of noncompetitive Recovery Act contracting within
these states. With respect to oversight, each state has supplemented
its state-level guidance with some additional Recovery Act-specific
policies and procedures but does not routinely provide state-level
oversight of contracts awarded at the local level. State audit
organizations for the selected states are focusing their audit
resources on programmatic reviews rather than focusing on the use of
noncompetitive Recovery Act contracts, consistent with their
assessments of relative risk.
Recommendation for Executive Action:
As the IGs of the five agencies we reviewed periodically revisit and
revise their Recovery Act audit plans, they should assess the need for
allocating an appropriate level of audit resources, as determined
using their risk-based analyses, to the noncompetitive contracts
awarded under SBA's 8(a) program.
Agency and State Comments and Our Evaluation:
We provided a draft of this report to DOD, DOE, HHS, NASA, SBA, and
their respective IGs for comment. We received e-mail comments from
DOD, HHS, and NASA, as well as the DOE IG and SBA IG, in which the
agencies all generally agreed with the report's findings and
recommendation or had no comments. In some cases, the agencies
provided technical comments or clarifying information, which we
incorporated into the report as appropriate. We received written
comments from SBA as well as the DOD IG, DOE IG, and NASA IG. The DOD
IG provided the department's official comments and agreed with the
draft report and its recommendation. The DOE IG noted that DOE is one
of the most contractor-dependent agencies in the government and that
the DOE IG routinely considers 8(a) program contracts in its audit
work. We consider the DOE IG's audit approach to be consistent with
the intent of our recommendation. The NASA IG agreed with the draft
report and its recommendation and noted that it is planning work on a
number of Recovery Act contracts involving 8(a) program businesses.
In its written comments, SBA noted its concern about our findings and
recommendation regarding the 8(a) program. Specifically, SBA was
concerned about what it viewed as our draft report's attempt to link
the legitimate use of the 8(a) program with the results of a previous
GAO report that found ineligible businesses receiving contracts under
the program. SBA was also concerned that our report might be
suggesting that use of the 8(a) program was either inappropriate or a
risky procurement choice. We did not intend to suggest that there was
anything improper with agencies deciding to use the 8(a) program in
implementing the Recovery Act. In fact, our report points out that
OMB's Recovery Act guidance specifically lists providing opportunities
for small businesses to the maximum extent practicable and supporting
disadvantaged businesses as goals for agencies using Recovery Act
funds. We mentioned our prior findings regarding 8(a) eligibility only
to illustrate that there may be issues that merit consideration by
agency IGs as part of their overall approach to audits related to
Recovery Act contracts that were not apparent when they developed
their Recovery Act audit plans.
We also provided a draft of this report to representatives within the
states of California, Colorado, Florida, New York, and Texas for
comment. We received e-mail comments from various officials within the
states of California, Colorado, Florida, and New York, including some
of the state audit organizations, in which they generally agreed with
the report's findings or had no comments. Some state officials
provided technical comments or clarifying information in their e-
mails, which we incorporated into the report as appropriate. We
received written comments from the states of Florida and Texas.
Florida generally agreed with the report's findings. Texas provided a
proposed factual addition and a technical comment, which we
incorporated as appropriate. Texas also made an observation that
Congress had not provided funds for state oversight of Recovery Act
funds. Although the Recovery Act did not provide such funds, as noted
in footnote 28 there is guidance from OMB that could permit
reimbursement of such state expenses under specified circumstances.
The written comments are reprinted in appendixes IV through IX.
We are sending copies of this report to interested congressional
committees, as well as the Secretaries of the Departments of Defense,
Energy, and Health and Human Services; the Administrators of the
National Aeronautics and Space Administration and the Small Business
Administration; and the Inspectors General of these five agencies. In
addition, we are sending the report to officials in the five states
covered in our review. The report also is available at no charge on
the GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-4841. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix X.
Sincerely yours,
Signed by:
John K. Needham:
Director, Acquisition and Sourcing Management:
[End of section]
Appendix I: Federal Agencies' Obligations on Competitive and
Noncompetitive Recovery Act Contract Actions as of May 2010:
Agency: Agency for International Development;
Competitive contract actions[A]: Number of actions: 4;
Competitive contract actions[A]: Obligations: $11,494,769;
Noncompetitive[B] contract actions: Number: of actions: 4;
Noncompetitive[B] contract actions: Obligations: $4,447,731.
Agency: Corporation for National and Community Service;
Competitive contract actions[A]: Number of actions: 9;
Competitive contract actions[A]: Obligations: $1,249,405;
Noncompetitive[B] contract actions: Number: of actions: 7;
Noncompetitive[B] contract actions: Obligations: $13,694,875.
Agency: Department of Agriculture;
Competitive contract actions[A]: Number of actions: 2,468;
Competitive contract actions[A]: Obligations: $421,954,996;
Noncompetitive[B] contract actions: Number: of actions: 700;
Noncompetitive[B] contract actions: Obligations: $105,021,223.
Agency: Department of Commerce;
Competitive contract actions[A]: Number of actions: 242;
Competitive contract actions[A]: Obligations: $337,216,693;
Noncompetitive[B] contract actions: Number: of actions: 55;
Noncompetitive[B] contract actions: Obligations: $65,958,421.
Agency: Department of Defense;
Competitive contract actions[A]: Number of actions: 7,139;
Competitive contract actions[A]: Obligations: $6,529,526,339;
Noncompetitive[B] contract actions: Number: of actions: 1,559;
Noncompetitive[B] contract actions: Obligations: $969,149,442.
Agency: Department of Education;
Competitive contract actions[A]: Number of actions: 69;
Competitive contract actions[A]: Obligations: $61,052,094;
Noncompetitive[B] contract actions: Number: of actions: 11;
Noncompetitive[B] contract actions: Obligations: $37,967.
Agency: Department of Energy;
Competitive contract actions[A]: Number of actions: 734;
Competitive contract actions[A]: Obligations: $6,990,566,222;
Noncompetitive[B] contract actions: Number: of actions: 100;
Noncompetitive[B] contract actions: Obligations: $133,670,179.
Agency: Department of Health and Human Services;
Competitive contract actions[A]: Number of actions: 733;
Competitive contract actions[A]: Obligations: $857,828,477;
Noncompetitive[B] contract actions: Number: of actions: 163;
Noncompetitive[B] contract actions: Obligations: $459,516,280.
Agency: Department of Homeland Security;
Competitive contract actions[A]: Number of actions: 132;
Competitive contract actions[A]: Obligations: $631,490,411;
Noncompetitive[B] contract actions: Number: of actions: 13;
Noncompetitive[B] contract actions: Obligations: $3,991,092.
Agency: Department of Housing and Urban Development;
Competitive contract actions[A]: Number of actions: 29;
Competitive contract actions[A]: Obligations: $5,406,066;
Noncompetitive[B] contract actions: Number: of actions: 11;
Noncompetitive[B] contract actions: Obligations: $4,537,987.
Agency: Department of Justice;
Competitive contract actions[A]: Number of actions: 8;
Competitive contract actions[A]: Obligations: $1,824,410;
Noncompetitive[B] contract actions: Number: of actions: 5;
Noncompetitive[B] contract actions: Obligations: $164,862.
Agency: Department of Labor;
Competitive contract actions[A]: Number of actions: 594;
Competitive contract actions[A]: Obligations: $206,515,164;
Noncompetitive[B] contract actions: Number: of actions: 50;
Noncompetitive[B] contract actions: Obligations: $33,566,097.
Agency: Department of State;
Competitive contract actions[A]: Number of actions: 1,291;
Competitive contract actions[A]: Obligations: $72,579,227;
Noncompetitive[B] contract actions: Number: of actions: 937;
Noncompetitive[B] contract actions: Obligations: $12,892,342.
Agency: Department of the Interior;
Competitive contract actions[A]: Number of actions: 3,231;
Competitive contract actions[A]: Obligations: $1,026,923,760;
Noncompetitive[B] contract actions: Number: of actions: 494;
Noncompetitive[B] contract actions: Obligations: $111,000,796.
Agency: Department of the Treasury;
Competitive contract actions[A]: Number of actions: 7;
Competitive contract actions[A]: Obligations: $14,939,935;
Noncompetitive[B] contract actions: Number: of actions: 4;
Noncompetitive[B] contract actions: Obligations: $716,305.
Agency: Department of Transportation;
Competitive contract actions[A]: Number of actions: 147;
Competitive contract actions[A]: Obligations: $323,955,926;
Noncompetitive[B] contract actions: Number: of actions: 32;
Noncompetitive[B] contract actions: Obligations: $20,915,472.
Agency: Department of Veterans Affairs;
Competitive contract actions[A]: Number of actions: 1,408;
Competitive contract actions[A]: Obligations: $564,805,231;
Noncompetitive[B] contract actions: Number: of actions: 81;
Noncompetitive[B] contract actions: Obligations: $16,923,677.
Agency: Environmental Protection Agency;
Competitive contract actions[A]: Number of actions: 198;
Competitive contract actions[A]: Obligations: $281,852,254;
Noncompetitive[B] contract actions: Number: of actions: 87;
Noncompetitive[B] contract actions: Obligations: $5,372,460.
Agency: Federal Communications Commission;
Competitive contract actions[A]: Number of actions: 424;
Competitive contract actions[A]: Obligations: $83,641,988;
Noncompetitive[B] contract actions: Number: of actions: 14;
Noncompetitive[B] contract actions: Obligations: $2,926,691.
Agency: General Services Administration;
Competitive contract actions[A]: Number of actions: 17,521;
Competitive contract actions[A]: Obligations: $4,198,806,529;
Noncompetitive[B] contract actions: Number: of actions: 425;
Noncompetitive[B] contract actions: Obligations: $232,267,774.
Agency: National Aeronautics and Space Administration;
Competitive contract actions[A]: Number of actions: 272;
Competitive contract actions[A]: Obligations: $591,895,269;
Noncompetitive[B] contract actions: Number: of actions: 82;
Noncompetitive[B] contract actions: Obligations: $298,932,194.
Agency: National Science Foundation;
Competitive contract actions[A]: Number of actions: 4;
Competitive contract actions[A]: Obligations: $50,500,000;
Noncompetitive[B] contract actions: Number: of actions: 0;
Noncompetitive[B] contract actions: Obligations: 0.
Agency: Small Business Administration;
Competitive contract actions[A]: Number of actions: 13;
Competitive contract actions[A]: Obligations: $731,216;
Noncompetitive[B] contract actions: Number: of actions: 29;
Noncompetitive[B] contract actions: Obligations: $10,418,888.
Agency: Smithsonian Institution;
Competitive contract actions[A]: Number of actions: 32;
Competitive contract actions[A]: Obligations: $18,579,372;
Noncompetitive[B] contract actions: Number: of actions: 5;
Noncompetitive[B] contract actions: Obligations: $587,105.
Agency: Social Security Administration;
Competitive contract actions[A]: Number of actions: 14;
Competitive contract actions[A]: Obligations: $3,582,185;
Noncompetitive[B] contract actions: Number: of actions: 2;
Noncompetitive[B] contract actions: Obligations: $2,441,646.
Agency: Total[C];
Competitive contract actions[A]: Number of actions: 36,723;
Competitive contract actions[A]: Obligations: $23,288,917,937;
Noncompetitive[B] contract actions: Number: of actions: 4,870;
Noncompetitive[B] contract actions: Obligations: $2,509,151,506.
Source: Federal Procurement Data System--Next Generation data as of
May 12, 2010.
[A] Contract actions include new contract awards and modifications to
or orders from existing contracts.
[B] For the purposes of this report, noncompetitive contract actions
include actions that were awarded using the exceptions to full and
open competition in the Federal Acquisition Regulation (FAR),
including, for example, sole-source contracts awarded under SBA's 8(a)
program as well as contracts awarded without competition under
simplified acquisition procedures.
[C] Totals exclude 456 Recovery Act contract actions for which the
extent of competition was not recorded in FPDS-NG. These actions
represent a total of $324,304,140 in Recovery Act obligations.
[End of table]
[End of section]
Appendix II: Key Recovery Act Programs, Spending, Contract File Review
Observations, and Oversight for Selected Agencies:
[End of section]
Department of Defense:
DOD's mission is to provide the military forces needed to deter war
and to protect the security of our country. The mission of USACE, one
of DOD's construction agents, is to provide vital public engineering
services in peace and war to strengthen our nation's security,
energize the economy, and reduce risks from disasters.
Key Recovery Act Programs:
DOD received approximately $7.4 billion in defense-related
appropriations under the Recovery Act, with an additional $4.6 billion
appropriated to USACE for its Civil Works Program. According to DOD's
Recovery Act plan, about 88 percent of its non-USACE Recovery Act
funding is for facilities infrastructure. This includes DOD's
Facilities Sustainment, Restoration, and Modernization program, the
Military Construction program, and the Energy Conservation Investment
Program. The remaining funds are for the expansion of the Homeowners
Assistance Program providing assistance to military and civilian
families and the Near Term Energy-Efficient Technologies program.
Recovery Act funds for USACE are allocated to various business
programs under the Civil Works Program including emergency management,
environment and environmental stewardship, flood risk management,
hydropower, navigation, recreation, regulatory, and water storage for
water supply. DOD program areas receiving Recovery Act funding are
listed in table 2.
Table 2: DOD Recovery Act Funds Allocation:
Program area: Civil Works Program (USACE);
Recovery Act funding: $4.60 billion;
Purpose: Construction, operations and maintenance for various
activities under the Civil Works Program.
Program area: Facilities Sustainment, Restoration and Modernization;
Recovery Act funding: $4.26 billion;
Purpose: Upgrades of existing DOD buildings, including energy-related
improvements.
Program area: Military Construction;
Recovery Act funding: $2.18 billion;
Purpose: Construction of new buildings;
more than half is for hospitals.
Program area: Energy Conservation Investment Program;
Recovery Act funding: $0.12 billion;
Purpose: Energy efficiency improvements to existing buildings.
Program area: Expanded Homeowners Assistance Program;
Recovery Act funding: $0.56 billion;
Purpose: Financial assistance to military and civilian personnel who
experience a financial loss on the sale of their homes.
Program area: Near Term Energy-Efficient Technologies;
Recovery Act funding: $0.30 billion;
Purpose: Development of energy-efficient technologies.
Sources: DOD and USACE.
[End of table]
Recovery Act Spending:
As of May 2010, DOD (including USACE) obligated more than $7.5 billion
of Recovery Act funds on contracts. DOD obligated about two-thirds of
its Recovery Act funds in the last two quarters of fiscal year 2009,
from April through September 2009. Figure 3 shows DOD obligations of
Recovery Act funds through contracts by fiscal quarter.
Figure 3: DOD Obligations of Recovery Act Funds through Contracts, by
Fiscal Quarter:
[Refer to PDF for image: vertical bar graph]
Fiscal year quarter: Q3 FY09;
DOD Obligations of Recovery Act Funds: $1.66 billion.
Fiscal year quarter: Q4 FY09;
DOD Obligations of Recovery Act Funds: $3.30 billion.
Fiscal year quarter: Q1 FY10;
DOD Obligations of Recovery Act Funds: $1.02 billion.
Fiscal year quarter: Q2 FY10;
DOD Obligations of Recovery Act Funds: $1.24 billion.
Fiscal year quarter: Q3 FY10;
DOD Obligations of Recovery Act Funds: $269.72 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Most of the funds that DOD obligated under Recovery Act contract
actions were on existing contracts, as shown in figure 4. Of those
funds obligated on new contracts, most were obligated to competitively
awarded contracts. Approximately 17 percent of obligations on new
contracts were obligated to noncompetitively awarded contracts, most
of which were awarded to 8(a) program small businesses.
Figure 4: DOD Recovery Act Obligations on New and Existing Federal
Contracts by Extent of Competition as of May 12, 2010:
[Refer to PDF for image: pie-chart and subchart]
Contract obligations:
Existing contracts: 62%;
New contracts: 38%:
* Competed: 83%;
* Noncompeted: 18%:
- 8(a) sole source: $445 million;
- Simplified acquisition procedures: $2 million;
- Sole or unique source: $16 million;
- Other: $11 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Observations from the Site Review at USACE Sacramento District:
We selected 67 noncompetitive contracts, task orders, or modifications
for review at the USACE Sacramento District. Most of these actions
were placed under existing indefinite delivery/indefinite quantity
[Footnote 33] (IDIQ) contracts that had been awarded to 8(a) program
businesses. Sacramento District contracting officials told us that
they typically award IDIQ contracts to 8(a) program businesses for
smaller-dollar projects as part of their regular business processes.
These contract vehicles can then be used to quickly place orders for
individual projects within the scope of the contract until the total
value of the contract approaches the $3.5 million threshold for
noncompetitive 8(a) program awards.
About half the dollars obligated under the Recovery Act by the
Sacramento District--over $53 million--were used to accelerate funding
of an existing project to relocate train tracks in Napa, California as
part of a flood control project. This action is considered
noncompetitive because the original contract was awarded sole-source
to an Alaska Native Corporation in 2008, prior to the enactment of the
Recovery Act; the contract was modified in 2009 to add Recovery Act
funds. According to USACE officials, the Recovery Act funding
accelerated the completion of the flood control project, which also
decreased the total cost of the project.
Some of the Recovery Act orders at Sacramento District were
administered by USACE on behalf of other DOD components, such as the
Army and Air Force. For instance, USACE placed an order on an existing
IDIQ contract with an 8(a) program business for work on ventilation
controls in buildings at Beale Air Force Base in Roseville, California.
Table 3 provides additional details on some noncompetitive contract
actions we reviewed at USACE Sacramento District. These examples
illustrate the variety of services and supplies being acquired, the
amount of Recovery Act funding used, and the reason a contract action
was not competed.
Table 3: Examples of Noncompetitive Recovery Act Contract Actions from
the DOD USACE Sacramento Site Review:
Purpose: Repair of fire suppression building at Military Ocean
Terminal;
Recovery Act funding: $594,922;
Reason contract action was not competed or is considered not
competed[A]: Modification to an existing noncompetitive contract;
Notes: The incumbent is an 8(a) program business.
Purpose: Placing and programming the ventilation controls in various
buildings at Beale Air Force Base, California;
Recovery Act funding: $241,639;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: This contract was awarded to an 8(a) program business and the
majority of the work is to be provided by subcontractors. The
programming to make the controls function is proprietary and may only
be performed by a particular subcontractor.
Purpose: Upgrades to electrical equipment at Terminus Dam, Lake
Kaweah, and Lemon Cove, California;
Recovery Act funding: $97,891;
Reason contract action was not competed or is considered not
competed[A]: Only one source available;
Notes: The district had difficulty procuring services for remote
locations such as Lake Kaweah and previous quotes from prospective
businesses included travel costs that were cost prohibitive. Only one
business in the local area with the capability to perform the work was
identified.
Purpose: Remediation/revegetation of area around Folsom Bridge;
Recovery Act funding: $2,506,590;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: Market research was performed to identify a HUBZone contractor
with the capability to perform the work, but the contract was
ultimately awarded to an 8(a) program business.
Purpose: Flood control project in downtown Napa, California, involving
relocation of a railroad track, including: raising the railroad track;
construction of four approaches and two bridges;
and the modification of several grade crossings at multiple surface
street intersections;
Recovery Act funding: $53,373,325;
Reason contract action was not competed or is considered not
competed[A]: Modification on a pre-Recovery Act noncompetitive
contract;
Notes: This modification was to terminate for convenience the full
contract value and reinstate that amount using Recovery Act funds.
According to USACE officials, using Recovery Act funds would allow the
project to be completed sooner, which would ultimately reduce the
region's exposure to flood risks and reduce overhead, inflation, and
administration costs.
Purpose: Remove/replace existing gutters and downspouts at various
warehouses at Sierra Army Depot;
Recovery Act funding: $421,210;
Reason contract action was not competed or is considered not
competed[A]: Task order on a pre-Recovery Act noncompetitive contract;
Notes: This task order is to an 8(a) program business using an
existing IDIQ contract.
Purpose: Application of a computer program to support updates to water
control plans for Alabama-Coosa-Tallapoosa River Basin and
Apalachicola-Chattahoochee-Flint River Basin;
Recovery Act funding: $312,383;
Reason contract action was not competed or is considered not
competed[A]: Task order on an existing noncompetitive contract;
Notes: This task order was issued under a blanket purchase agreement.
The business had institutional knowledge associated with hydrologic
software that could not be duplicated by another business without many
months or years of lost productivity.
Purpose: Widening of levee crown and provide restoration work at sites
in Carmichael, California;
Recovery Act funding: $1,810,392;
Reason contract action was not competed or is considered not
competed[A]: Task order on a pre-Recovery Act noncompetitive contract;
Notes: This task order is to an 8(a) program business using an
existing IDIQ contract.
Purpose: Asbestos removal at various buildings at Presidio of
Monterey, California;
Recovery Act funding: $281,234;
Reason contract action was not competed or is considered not
competed[A]: Task order on a pre-Recovery Act noncompetitive contract;
Notes: This task order is to an 8(a) program business using an
existing IDIQ contract.
Purpose: Electric services for campsite and bathroom expansions at
Cordoniz Campground;
Recovery Act funding: $16,280;
Reason contract action was not competed or is considered not
competed[A]: Only one source available;
Notes: Provisions of utility services are controlled by the State of
California Public Utilities Commission and the selected business was
the only provider of electric service in the county.
Source: GAO analysis of USACE contract documents:
[A] Modifications or task orders on noncompetitive contracts existing
prior to enactment of the Recovery Act are considered noncompetitive.
[End of table]
Agency Contracts Requiring Justifications for Noncompetitive Awards:
Using FPDS-NG data as of February 19, 2010, we identified 16 DOD
contracts that required documented justification and approval for
using other than full and open competition. Our review of these
justification documents found that they included information to
support the stated reason for a noncompetitive award. The most common
reason, cited in 15 of the contract files, was that only one source
was able to provide the product or service. Within this group, about
half were contracts for utilities such as water service, while most of
the others within this group were for proprietary equipment or
technology that could only be provided by one business. For instance,
one contract was for the purchase of replacement parts for a hydraulic
system at a USACE dam. The justification stated that the contract was
awarded without competition because the original manufacturer of the
equipment is the only available source of replacement parts.
Agency Contract Oversight:
DOD efforts to provide oversight and transparency for Recovery Act
activities include internal coordination, increased reporting to
management, and recipient reporting.
Coordination: The Office of the Secretary of Defense (OSD) assigned
the Principal Deputy Under Secretary of Defense within its
Comptroller's office responsibility for Recovery Act oversight and
coordination at the department level. OSD also established the
Recovery Act Defense Department Working Group, which holds a weekly
meeting that includes representatives from each of the services; the
IG's office; the small business coordinator; the Acquisition,
Technology and Logistics office; and other entities within DOD.
According to officials, the working group's discussions cover a
variety of Recovery Act issues at a high level, some of which are
specifically contracting-related, such as contract obligations and
updates on specific programs.
Reporting: At the OSD level, information on Recovery Act activities,
including contracting, is gathered from the individual services and
FPDS-NG and compiled in the Business Enterprise Information System,
which enables management to oversee DOD's Recovery Act programs across
all three services. For instance, the system includes data on contract
obligations and estimated completion dates for DOD Recovery Act
projects, and is updated continually. Individual DOD components have
also implemented additional management reporting--for instance, USACE
generates a weekly report for its leadership on the progress of
Recovery Act projects.
Additional review: DOD did not create any additional levels of pre-
award approval at the department level; contracting is administered by
the individual services. USACE did not implement any additional levels
of pre-award approval for Recovery Act contracts.
Issues: OSD officials said that no schedule or cost overrun issues
have come to their attention. The only contract-related problem that
they have had to address at the department level has been with
recipient reporting and ensuring that recipient reports are filed by
the contractors and are accurate.
IG Contract Oversight:
Risk assessment: When designing its Recovery Act audit approach, DOD
IG used data on individual DOD projects to assess risk and focus its
efforts. The risk assessment ranked individual projects, incorporating
the dollar value of the contracts, project type, location, and
contract characteristics, such as the level of competition, as risk
factors. DOD IG initially selected the 83 highest-risk projects based
on these criteria. Once on-site reviews began, the information
gathered was used to further refine the risk assessment criteria and
select some additional projects.
Audit Approach: The DOD IG established a three-phase review of
Recovery Act-related activities.
* Phase 1, review of DOD and program-specific Recovery Act
implementation plans, has been completed. These reviews found that the
DOD and program plans met Office of Management and Budget (OMB)
standards, although the DOD IG called for additional detail regarding
how the agency arrived at its projections of the proportion of
contracts that would be awarded competitively.
* Phase 2 is a review of the implementation of the Recovery Act
programs, focusing on the projects based on the results of the risk
assessment. DOD IG identified sites to visit for the Facilities
Sustainment, Restoration, and Modernization and Military Construction
programs. The DOD IG's reviews within each military service are being
conducted in cooperation with the respective military service audit
agencies. As part of this work, DOD IG and audit agency staff review
the extent of competition and the related documentation for selected
contracts. The Air Force Audit Agency is also conducting some
additional Recovery Act reviews beyond those it is conducting on
behalf of the DOD IG. This work is ongoing.
* In Phase 3, which is not yet underway, the DOD IG will provide
oversight of the construction of the projects, ensure that all
required reporting is taking place, and review the results of the
projects.
Findings: As of June 9, 2010, the DOD IG and military service audit
agencies had posted reports on about 27 individual site reviews on
www.Recovery.gov. These reports have found management of Recovery Act
contracting to be generally good, although they suggest areas for
improvement at some specific installations, such as ensuring that all
Recovery Act-related clauses are included in every contract, or
developing a plan to manage recipient reporting.
Department of Energy:
DOE works to advance the national, economic, and energy security of
the United States; to promote scientific and technological innovation
in support of that mission; and to ensure the environmental cleanup of
the national nuclear weapons complex.
Key Recovery Act Programs:
DOE received approximately $36.7 billion in funding under the Recovery
Act. Of this, $32.7 billion was for the award of grants and contracts.
[Footnote 34] However, many programs involved comparatively little
contracting by DOE--for instance, the Weatherization Assistance
Program ($5 billion) provided grants to states. By contrast, funding
for cleanup of nuclear sites ($6 billion) is spent primarily through
contracts. DOE program areas receiving Recovery Act funding are listed
in table 4.
Table 4: DOE Recovery Act Funds Allocation:
Program area: Energy efficiency and renewable energy;
Recovery Act funding (dollars in billions): $13.64 billion;
Purpose: Energy efficiency and renewable energy research and
initiatives, including home weatherization.
Program area: Cleanup of nuclear sites;
Recovery Act funding: $6.0 billion;
Purpose: Remediation of contaminated former nuclear sites.
Program area: Smart grid and efficient electrical transmission;
Recovery Act funding: $4.5 billion;
Purpose: Grants, demonstration programs, and planning related to
electrical transmission technology.
Program area: Carbon capture/storage;
Recovery Act funding: $3.4 billion;
Purpose: Initiatives and research and carbon capture and storage.
Program area: Transportation;
Recovery Act funding: $2.9 billion;
Purpose: Investments in new fuel and vehicle technologies.
Program area: Scientific research;
Recovery Act funding: $2.0 billion;
Purpose: Scientific research grants, including funding for the
Advanced Research Projects Agency.
Source: DOE.
[End of table]
Recovery Act Spending:
As of May 2010, DOE had obligated more than $7.1 billion of Recovery
Act funds through contracts. Most of the DOE Recovery Act contracting
funds to date were obligated within the last two quarters of fiscal
year 2009, from April through September 2009. Figure 5 shows DOE
obligations of Recovery Act funds through contracts by fiscal quarter.
Figure 5: DOE Obligations of Recovery Act Funds through Contracts, by
Fiscal Quarter:
[Refer to PDF for image: vertical bar graph]
Fiscal year quarter: Q3 FY09;
DOE Obligations of Recovery Act Funds: $4.14 billion.
Fiscal year quarter: Q4 FY09;
DOE Obligations of Recovery Act Funds: $2.51 billion.
Fiscal year quarter: Q1 FY10;
DOE Obligations of Recovery Act Funds: $99 million.
Fiscal year quarter: Q2 FY10;
DOE Obligations of Recovery Act Funds: $211 million.
Fiscal year quarter: Q3 FY10;
DOE Obligations of Recovery Act Funds: $177.2 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Nearly all--almost 100 percent--of the funds that DOE obligated under
Recovery Act contract actions were on existing contracts, as shown in
figure 6. About 97 percent of all Recovery Act funds at DOE were on
contract actions coded in FPDS-NG as awarded competitively. However,
among the small amount of funds obligated through new contracts, 92
percent were obligated on noncompetitively awarded contracts.
Figure 6: DOE Recovery Act Obligations on New and Existing Federal
Contracts by Extent of Competition as of May 12, 2010:
[Refer to PDF for image: pie-chart and subchart]
Contract obligations:
Existing contracts: 100%;
New contracts: less than 1%:
* Competed: 8%;
* Noncompeted: 92%:
- 8(a) sole source: $3 million;
- Simplified acquisition procedures: $4 million;
- Sole or unique source: $4 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Observations from the Site Review at the Environmental Management
Consolidated Business Center:
Of the 16 contract actions we reviewed at DOE's Environmental
Management Consolidated Business Center, all were orders or
modifications on existing noncompetitive contracts. Several added
funding to existing remediation projects for sites with radioactive
contamination. For example, $1.9 million in Recovery Act funds were
obligated on a contract for environmental remediation for the Uranium
Mill Tailings Remediation Action in Moab, Utah. Other contracts were
for administrative support and involved smaller amounts of Recovery
Act funds. For instance, DOE issued an order on an existing contract
for monitoring and reporting support.
Table 5 provides additional details on some noncompetitive contract
actions we reviewed at the Environmental Management Consolidated
Business Center. These examples illustrate the variety of services and
supplies being acquired, the amount of Recovery Act funding used, and
the reason a contract action was not competed.
Table 5: Examples of Noncompetitive Contract Actions from the DOE
Environmental Management Consolidated Business Center Site Review:
Purpose: Waste management, environmental restoration, program support,
and landlord activities during the period required to complete an
environmental impact statement related to closure of the facility;
Recovery Act funding: $15,875,000;
Reason contract action was not competed or is considered not
competed[A]: Modification of a noncompetitive contract;
Notes: The facility requires remediation prior to closure as it was
involved in nuclear energy research and is within an area owned by the
business.
Purpose: Support for uranium mill tailing remediation at Moab, Utah;
Recovery Act funding: $1,900,000;
Reason contract action was not competed or is considered not
competed[A]: Modification of a noncompetitive contract;
Notes: According to DOE contracting officials, the original contract
was awarded sole-source to a tribal 8(a) program business because it
resulted in a faster award, helped meet DOE socioeconomic contracting
goals, and allowed the agency to address concerns of the local tribal
population.
Purpose: Deactivation and decommissioning of the graphite reactor and
its associated facility at Brookhaven National Laboratory;
Recovery Act funding: $29,524;
Reason contract action was not competed or is considered not
competed[A]: Noncompetitive task order;
Notes: A task order was issued to the incumbent business instead of
selecting another contractor because it was determined that the
business had corporate knowledge of the working conditions, disposal
options, and Laboratory unique rules and regulations. Selection of
another contractor to perform these requirements was determined to
cost the government significantly more.
Purpose: Support for monitoring and reporting on technical,
programmatic, regulatory, environmental, safety and health, and
execution issues of site work funded by the Recovery Act;
Recovery Act funding: $265,047;
Reason contract action was not competed or is considered not
competed[A]: Modification to a task order issued under an existing
noncompetitive contract;
Notes: This contract is to provide support services for 1 year.
Source: GAO analysis of DOE contract documents.
[A] Modifications or task orders on noncompetitive contracts existing
prior to enactment of the Recovery Act are considered noncompetitive.
[End of table]
Agency Contracts Requiring Justifications for Noncompetitive Awards:
In a review of FPDS data as of February 19, 2010, we did not identify
any new noncompetitive DOE contracts requiring a documented
justification and approval for being awarded noncompetitively.
Agency Contract Oversight:
DOE efforts to provide oversight and transparency for Recovery Act
activities include internal coordination, increased reporting to
management, and recipient reporting.
Coordination: DOE created the Senior Advisor position in the Office of
the Secretary of Energy charged with overseeing Recovery Act
implementation. This official leads the Office of the Recovery Act,
which holds regular meetings with key officials from each of the
agency's program and functional divisions. These meetings were held
daily in the first months of Recovery Act implementation and are now
held weekly. According to agency officials, a primary goal of these
coordination meetings is to create strong links between the work of
program offices and that of the functional offices, such as
contracting, that support the programs. Topics of discussion at these
meetings include the status of ongoing projects, areas of Recovery Act
implementation identified as lagging, and other issues raised through
review of agency data or by meeting participants. Officials said that
Recovery Act coordination teams have also been established within
individual DOE functional offices.
Reporting: DOE increased the amount of internal reporting as part of
its Recovery Act oversight. An internal system, iPortal, reports
detailed financial, earned value management,[Footnote 35] performance,
risk, and job creation data on DOE projects. This system had already
been in place, but was expanded for the Recovery Act to support more
frequent reporting, performance dashboard displays, and an increased
number of users from across the agency. The iPortal system generates
automated daily and weekly reports to agency officials on key aspects
of Recovery Act implementation; officials also use it to browse data
on individual programs and projects. In addition, officials said that
each program participates in a quarterly review of Recovery Act
performance.
Additional review: According to DOE officials, all projects receiving
Recovery Act funding had to be approved by the program office, the
Office of the Recovery Act, the Under Secretary, and the Secretary.
The projects were also reviewed and approved by OMB before contract
performance could begin. After these projects completed this review
process, DOE did not impose any additional levels of pre-award
contract review beyond its normal processes, according to officials.
Issues: Agency officials said that they had not encountered any
notable problems in implementing Recovery Act contracts.
IG Contract Oversight:
Risk assessment: According to DOE IG officials, the DOE IG's Office of
Audit Services conducts an annual risk assessment, and in response to
the Recovery Act, the office incorporated its programs into the
existing process. Officials said that this assessment includes
collective judgment of risks and vulnerabilities from the DOE IG's
previous audit work, and combines these risks with other factors such
as the level of funding. DOE IG officials said that they were familiar
with existing remediation contracts through their prior work, and
determined that adding additional funding to them was not high risk.
Audit approach: DOE IG created a tiered approach to oversight of
Recovery Act funds. Because the areas identified in the risk
assessment do not emphasize contracting, only portions of the audit
approach include contracting.
* Tier 1: Review the department's internal control structure and
management of the most significant programs (those exceeding $500
million) under the Recovery Act.
* Tier 2: Examine the efficiency and effectiveness of the department's
distribution of funds to primary recipients such as state and local
governments.
* Tier 3: Examine the use of funds by contract and grant recipients
through transaction testing. Because grants represent a larger share
of DOE Recovery Act funds, DOE IG officials said that grant programs
have been the focus of the majority of their reviews.
Findings: DOE IG has released seven Recovery Act-related reports that
address contracting issues. Most of these are not direct reviews of
the agency's Recovery Act spending, but rather address previously
identified management issues that the DOE IG determined could have an
impact on the agency's Recovery Act programs. For example, the DOE IG
issued a report on the agency's management of contract fines,
penalties and legal costs, and noted the potential impact on Recovery
Act implementation.
Department of Health and Human Services:
HHS's mission is to enhance the health and well-being of Americans by
providing for effective health and human services and by fostering
strong, sustained advances in the sciences, underlying medicine,
public health, and social services.
Key Recovery Act Programs:
The Recovery Act provided over $145 billion to HHS of which the agency
has allocated over $90 billion (63 percent) to improving and
preserving health care. Over $25 billion or 18 percent will be used
for health information technology. Spending on children and family
services and scientific research and facilities make up most of the
remaining funds. As of June 30, 2010 HHS has obligated over $87
billion of its Recovery Act funds, including nearly $1.3 billion in
contracts and orders. HHS program areas receiving Recovery Act funding
are listed in table 6.
Table 6: HHS Recovery Act Funds Allocation:
Program area: Improving and Preserving Health Care;
Recovery Act funding: $91.6 billion;
Purpose: Temporary increase in Medicaid, assistance to hospitals,
tribal protections, and health professions training and support.
Program area: Health Information Technology;
Recovery Act funding: $25.8 billion;
Purpose: Accelerating the adoption of health information technology,
such as electronic health records.
Program area: Children & Community Services;
Recovery Act funding: $13.3 billion;
Purpose: Funding for programs such adoption and foster care
assistance, meals for the elderly and persons with disabilities, Head
Start, and subsidized child care to support children and families.
Program area: Scientific Research and Facilities;
Recovery Act funding: $10.0 billion;
Purpose: Research performed at the National Institutes of Health (NIH)
in areas of prevention, detection, diagnosis, and treatment of disease
and disability; includes funding for construction and maintenance of
research facilities.
Program area: Community Health Care Services;
Recovery Act funding: $2.8 billion;
Purpose: Expansion, improvement, and renovation at community and
Indian Health Center facilities.
Program area: Comparative Effectiveness;
Recovery Act funding: $1.1 billion;
Purpose: Research to conduct comparisons of different interventions
and strategies to prevent, diagnose, treat and monitor health
conditions.
Program area: Prevention & Wellness;
Recovery Act funding: $1.0 billion;
Purpose: Disease prevention, immunization and infection reduction
efforts.
Program area: Accountability and Information Technology Security;
Recovery Act funding: $0.1 billion;
Purpose: HHS IG oversight and increased security of computer systems.
Source: HHS.
[End of table]
Recovery Act Spending:
Recovery Act contract obligations peaked in the fourth quarter of
fiscal year 2009 at $752 million. These obligations have been below
$300 million in each subsequent quarter. Figure 7 shows HHS
obligations of Recovery Act funds through contracts by fiscal quarter.
Figure 7: HHS Obligations of Recovery Act Funds through Contracts, by
Fiscal Quarter:
[Refer to PDF for image: vertical bar graph]
Fiscal year quarter: Q3 FY09;
HHS Obligations of Recovery Act Funds: $57 million.
Fiscal year quarter: Q4 FY09;
HHS Obligations of Recovery Act Funds: $752 million.
Fiscal year quarter: Q1 FY10;
HHS Obligations of Recovery Act Funds: $122 million.
Fiscal year quarter: Q2 FY10;
HHS Obligations of Recovery Act Funds: $242 million.
Fiscal year quarter: Q3 FY10;
HHS Obligations of Recovery Act Funds: $147.4 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Most of the funds that HHS obligated under Recovery Act contract
actions, about 83 percent, were obligated on existing contracts as
shown in figure 8. Of the funds used for new contract actions, 76
percent were obligated on contracts that were competed. Of the
obligations on noncompetitive new contract actions, 58 percent were on
actions awarded noncompetitively because of the urgency of the
agency's need, 22 percent were on actions for which only one source
was available, 9 percent were on actions awarded noncompetitively
under SBA's 8(a) program, and 2 percent were on actions
noncompetitively awarded under simplified acquisition procedures.
Figure 8: Percentage of HHS Obligations Competed and Types of
Noncompetitive Actions as of May 12, 2010:
[Refer to PDF for image: pie-chart and subchart]
Contract obligations:
Existing contracts: 83%;
New contracts: 17%:
* Competed: 76%;
* Noncompeted: 24%:
- Urgency: $30 million;
- Sole or unique source: $11 million;
- 8(a) sole source: $5 million;
- Other: $4 million;
- Simplified acquisition procedures: $1 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Observations from the Site Review at NIH:
We selected NIH for our contract file review as it had the largest
amount of noncompetitive Recovery Act actions in numbers and dollars.
The most common reason for not competing the award of a contract was
that there was only one source available. This occurred on contracts
for new medical and laboratory equipment for which only one business
could meet the requirements of the contract. Only one source available
was listed on contracts for equipment and software upgrades. In these
cases, the program and contracting offices decided that it was more
practical to upgrade the existing equipment than it was to purchase
new equipment. These upgrades were only available through the
manufacturer of the equipment and were therefore not competed. The
contract files included market research that did not identify
alternative sources or comparable price quotes for similar items.
Table 7 provides additional details on some noncompetitive contract
actions we reviewed at NIH. These examples illustrate the variety of
services and supplies being acquired, the amount of Recovery Act
funding used, and the reason a contract action was not competed.
Table 7: Examples of Noncompetitive Recovery Act Contract Details from
the HHS NIH Site Review:
Purpose: Upgrades to existing medical diagnostic imaging systems
needed by NIH for improved radiological clinical diagnosis;
Recovery Act funding: $144,480;
Reason contract action was not competed or is considered not
competed[A]: Only one source available;
Notes: It was determined through a market survey and market research
that only the original business could meet the requirements to upgrade
the workstation previously acquired. Using another business would
require purchase of a new workstation which would not be cost
effective or beneficial to the government.
Purpose: Purchase of equipment needed by NIH to prepare plate samples
as part of genome sequencing research;
Recovery Act funding: $7,216;
Reason contract action was not competed or is considered not
competed[A]: Only one source available;
Notes: It was determined through market research that the business has
the only equipment and supplies with the minimum requirements that are
essential to the government's research.
Purpose: Software upgrades to an existing workstation needed by NIH
for diagnostic oncology;
Recovery Act funding: $67,780;
Reason contract action was not competed or is considered not
competed[A]: Only one source available;
Notes: The business is the only source capable of providing an upgrade
to the proprietary software and hardware. Two other businesses
provided demonstrations of their software, but confirmed that the
existing workstation is proprietary and they cannot provide an upgrade.
Purpose: Purchase of equipment for imaging at sub-micron resolution in
large numbers of cells and to provide analysis at both single cell and
population levels;
Recovery Act funding: $419,000;
Reason contract action was not competed or is considered not
competed[A]: Only one source available;
Notes: After performing a market survey and obtaining price quotes for
comparable equipment, it was determined that the comparable equipment
could not meet requirements.
Purpose: Upgrades to systems used for grants management and business
operations software, including modifications to enable Recovery Act
reporting;
Recovery Act funding: $49,900;
Reason contract action was not competed or is considered not
competed[A]: Only one source available;
Notes: This business was awarded the contract in part because the
business had personnel who were involved in the original development
of the systems.
Purpose: Support for reviewing Recovery Act-funded grants at the
National Institute of Child Health and Human Development and the
National Institute on Alcohol Abuse and Alcoholism;
Recovery Act funding: $189,000;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: The business was awarded the contract in part because it
provides scientific review officers with extensive experience in the
field of drug abuse and alcohol abuse research administration.
Purpose: Hardware and software upgrade to equipment used for patient
image archiving;
Recovery Act funding: $802,532;
Reason contract action was not competed or is considered not
competed[A]: Only one source available;
Notes: The business was awarded the contract in part because it is the
only source that can upgrade components to the existing system that it
originally built for NIH several years ago for storing patient image
data.
Source: GAO analysis of NIH contract documents.
[A] Modifications or task orders on noncompetitive contracts existing
prior to enactment of the Recovery Act are considered noncompetitive.
[End of table]
Agency Contracts Requiring Justifications for Noncompetitive Awards:
Using FPDS-NG data as of February 19, 2010, we identified four
contracts at HHS--three awarded at the Centers for Disease Control and
Prevention and one at NIH--that required a documented justification
and approval for using other than full and open competition. In each
case, the contractor was selected on a noncompetitive basis because
there was only one source available that could fully meet project
requirements. For example, on an NIH contract for the upgrade of a
system that stores pictures generated by medical imaging devices, it
was determined that the incumbent contractor was the only source
capable of meeting the contract requirements as it had important
institutional knowledge and access to a proprietary system, and no
other sources could be found. While one other source offered a
competing proposal, it was to replace the system rather than upgrading
the existing system, a less-cost efficient and time-consuming
alternative, according to agency officials.
Agency Contract Oversight:
HHS efforts to provide oversight and transparency for Recovery Act
activities include internal coordination, increased reporting to
management, and recipient reporting.
Coordination: HHS has established an Office of Recovery Act
Coordination (ORAC) which coordinates with relevant business
management functions, such as public affairs, grants and contract
management, financial management, budget, planning and evaluation,
information technology, and the Office of the General Counsel. It also
coordinates with the offices that manage appropriated funds and
programs authorized under the Recovery Act. In addition to acting as
the central repository for data, policies, and procedures related to
the Recovery Act, ORAC prepares executive-level reports that portray
the overall status of Recovery Act implementation based on individual
project and activity plans. ORAC also identifies the key tasks,
milestones, and activities for each project plan that require
coordination with HHS program and business functions.
Additional review: NIH has established a process early in the
acquisition planning stage for contracts using Recovery Act funds
whereby a summary of the requirement, including any justifications for
noncompetitive acquisitions, is reviewed and approved by various
senior representatives to ensure that the requirement meets the intent
of the Recovery Act and that the justification is supported. This
document is called a Proposed Recovery Act Contract Action Approval
Form. NIH contracting staff use a checklist in each contract to ensure
that the files are complete and comply with Recovery Act requirements.
NIH also developed detailed guidance that complements and expands
guidance issued by OMB. All contract actions at NIH funded in whole or
in part by the Recovery Act are subject to this guidance. Included in
this guidance are additional oversight mechanisms and measures related
to use of noncompetitive acquisitions.
IG Contract Oversight:
The Recovery Act provided the HHS IG with $17 million in funding for
oversight and review and an additional $31,250,000 for ensuring the
proper expenditure of funds under Medicaid. As of May 2010, the HHS IG
has used $4.8 million of these funds.
According to the HHS IG, internal risk assessments determined that the
areas of greatest risk were the grant awards of the Administration for
Children and Families (which is administering grant funds for expanded
Head Start programs, among other programs) and the Health Resources
and Services Administration, particularly those related to community
health center grants. Accordingly, HHS IG officials are focusing their
oversight efforts on these agencies.
By contrast, HHS IG officials determined that contracting activities,
such as those we reviewed at NIH, are of comparatively lower risk.
Efforts are presently focused on the identified high-risk departments
and programs. While the HHS IG plans to review Recovery Act spending
at colleges and universities in fiscal year 2011, these reviews will
focus on compliance with grant terms.
National Aeronautics and Space Administration:
NASA's mission is to pioneer the future in space exploration,
scientific discovery and aeronautics research.
Key Recovery Act Programs:
NASA received approximately $1 billion in Recovery Act funds, 80
percent of which were used for Science and Exploration programs, 15
percent for Aeronautics programs, and 5 percent for cross-agency
support programs which include restoration of NASA-owned facilities
damaged by hurricanes and other natural disasters that occurred during
calendar year 2008. NASA program areas receiving Recovery Act funding
are listed in table 8.
Table 8: NASA Recovery Act Funds Allocation:
Program area: Science;
Recovery Act funding: $400 million;
Purpose: Accelerate the development of the Tier 1 set of Earth Science
climate research missions and increase the agency's supercomputing
capabilities.
Program area: Exploration;
Recovery Act funding: $400 million;
Purpose: Maintain initial operational capability date for the Ares-1
and Orion projects and to retain and/or increase the number of jobs,
particularly in engineering, analysis, design, and research;
stimulate efforts within the private sector to develop and demonstrate
human spaceflight capabilities.
Program area: Aeronautics;
Recovery Act funding: $150 million;
Purpose: Undertake systems-level research, development and
demonstration activities related to aviation safety, environmental
impact mitigation, and the Next Generation Air Transportation System.
Program area: Cross-agency support;
Recovery Act funding: $50 million;
Purpose: Restore NASA-owned facilities damaged by hurricanes and other
natural disasters that occurred during calendar year 2008.
Source: NASA.
[End of table]
Recovery Act Spending:
Nearly half of NASA's Recovery Act contracting funds were obligated in
the fourth quarter of fiscal year 2009. Figure 9 shows NASA
obligations of Recovery Act funds through contracts by fiscal quarter.
Figure 9: NASA Obligations of Recovery Act Funds through Contracts, by
Fiscal Quarter:
[Refer to PDF for image: vertical bar graph]
Fiscal year quarter: Q3 FY09;
NASA Obligations of Recovery Act Funds: $8 million.
Fiscal year quarter: Q4 FY09;
NASA Obligations of Recovery Act Funds: $433 million.
Fiscal year quarter: Q1 FY10;
NASA Obligations of Recovery Act Funds: $190 million.
Fiscal year quarter: Q2 FY10;
NASA Obligations of Recovery Act Funds: $201 million.
Fiscal year quarter: Q3 FY10;
NASA Obligations of Recovery Act Funds: $58.6 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Most of the funds that NASA obligated under Recovery Act contract
actions, about 89 percent, were obligated on existing contracts as
shown in figure 10. Of the funds obligated for new actions, over 79
percent were obligated on contracts that were competed. For the
noncompetitive new contract obligations, 64 percent were on actions
awarded noncompetitively under SBA's 8(a) program, 33 percent were on
actions awarded noncompetitively because there was only one source
available, and 3 percent were on actions noncompetitively awarded
under simplified acquisition procedures.
Figure 10: NASA Recovery Act Obligations Competed and Types of
Noncompetitive Actions as of May 12, 2010:
[Refer to PDF for image: pie-chart and subchart]
Contract obligations:
Existing contracts: 89%;
New contracts: 11%:
* Competed: 79%;
* Noncompeted: 21%:
- 8(a) sole source: $13.5 million;
- Only one source: $6.9 million.
- Other: $0.5 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Observations from the Site Review at NASA Johnson Space Center:
We reviewed 10 noncompetitive Recovery Act contract actions awarded by
the NASA Johnson Space Center (JSC). The largest single obligation of
Recovery Act funds that we reviewed at NASA was a $15 million
modification (change order) to an existing noncompetitive contract in
support of Common Docking Adapter development for the International
Space Station. Six contract actions in our sample were new contracts
to 8(a) program businesses to provide a variety of construction
services, repair services, or both at JSC. NASA cited the Recovery Act
guidance directing agencies to take advantage of any authorized small
business contracting program as its reason for selecting these
businesses. Prior to selecting these businesses, the agency performed
market research and coordinated with SBA to identify a potential pool
of 8(a) program businesses. NASA then held capability briefings with
those businesses from which award selections were made. Finally, there
were three orders using an existing, originally noncompetitive
contract to an 8(a) program business for construction oversight
administration services at JSC.
Table 9 provides additional details on some noncompetitive contract
actions we reviewed at JSC. These examples illustrate the variety of
services and supplies being acquired, the amount of Recovery Act
funding used, and the reason a contract action was not competed.
Table 9: Examples of Noncompetitive Recovery Act Contract Details from
the NASA JSC Site Review:
Purpose: Cross-agency placement and administration support services
for construction contracts authorized under the Recovery Act;
Recovery Act funding: $242,696;
Reason contract action was not competed or is considered not
competed[A]: Task order on an existing noncompetitive contract;
Notes: The task order was issued using an existing blanket purchase
agreement with a small, women-owned business. The task order was
modified to comply with Recovery Act coding requirements.
Purpose: Replace carpets at a JSC facility;
Recovery Act funding: $82,579;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: The business is a woman-owned small business and had experience
replacing carpets at the University of Texas.
Purpose: Cleaning and sealing of panels along with caulking of all
joints on the exterior of the buildings;
Recovery Act funding: $3,391,619;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: The business had experience caulking under prior contracts with
Harris County, Texas.
Purpose: Demolition and removal of existing roof and installation of
new roofing system at a JSC facility;
Recovery Act funding: $1,817,433;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: The business had recent experience successfully completing two
roofing projects at JSC.
Purpose: Phase II development of the International Space Station
Common Docking Adapter;
Recovery Act funding: $15,000,000;
Reason contract action was not competed or is considered not
competed[A]: Modification to an existing noncompetitive contract;
Notes: The business was determined to be uniquely qualified to perform
the project because it had solely developed and integrated the
International Space Station. Modifying the existing contract was
determined to be the most appropriate contract vehicle for the
preservation of jobs using Recovery Act funds. The Recovery Act funded
effort was a separate, cost-reimbursable, performance-based fee
contract line item that was placed on the existing cost-plus-award-fee
contract.
Purpose: Design and construction of an open-sided metal hangar that
shall provide a covered area for limited aircraft maintenance and
overhead protection for aircraft and ground support equipment;
Recovery Act funding: $3,388,000;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: The business had recent experience renovating an aircraft
hangar at a U.S. Naval base.
Purpose: Replacement of aging and deteriorating pedestrian light
poles, foundations, and light fixtures at JSC that show physical
damage from Hurricane Ike;
Recovery Act funding: $774,099;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: This business demonstrated recent experience on concrete and
street repair projects and performed contracts at JSC and with other
federal agencies.
Purpose: Replacement of the windows and related gaskets at a JSC
facility;
Recovery Act funding: $2,830,879;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: The business was a local business with experience on high-rise
construction projects.
Source: GAO analysis of NASA contract documents.
[A] Modifications or task orders on noncompetitive contracts existing
prior to the enactment of the Recovery Act are considered
noncompetitive.
[End of table]
Agency Contracts Requiring Justifications for Noncompetitive Awards:
In a review of FPDS data as of February 19, 2010, we identified one
new NASA contract that required a documented justification and
approval for use of a noncompetitive award. According to the
justification for this contract, only one source was available for
specific electronic systems because only one business had developed a
spaceflight-appropriate version of the technology.
Agency Contract Oversight:
NASA efforts to provide oversight and transparency of Recovery Act-
funded efforts include internal coordination, issuing guidance to the
procurement community on the implementation of the Recovery Act, a
prohibition on commingling of funds, greater reporting to senior
management, and recipient reporting. There are weekly meetings of NASA
oversight and contracting officials to coordinate Recovery Act
efforts. In addition, the agency developed an internal online file
management system that stores Recovery Act-related contract files and
can be accessed by agency officials.
NASA issued Procurement Information Circular 09-06E to provide
guidance to the procurement community on the implementation of the
Recovery Act. The guidance provides instruction on a range of Recovery
Act contracting topics including requisition requirements for
initiating procurement actions, pre-award considerations and
contracting officer responsibilities, posting and reporting
requirements for contract actions, inclusion of new FAR clauses,
instructions specific to construction contracts, and contractor
invoicing procedures, among others. The circular also includes NASA's
process for reviewing contactor reporting under the Recovery Act.
IG Contract Oversight:
According to officials, the NASA IG is reviewing Recovery Act contract
actions at selected NASA centers as appropriate; this will include two
types of audits, one of the administration and implementation of the
contract award and another of the performance of the contractor.
Officials reported that the initial administrative audits of Recovery
Act contract actions through November 2009 are complete at a number of
the centers including Johnson, Goddard, Langley, and Ames. As of June
2010, one contractor performance audit had been conducted. On July 1,
2010, the NASA IG issued a draft report on the combined administrative
audits for NASA management's review and comment. The NASA IG is
releasing staggered performance reports and may issue a capping
report, as necessary.
The NASA IG conducted an initial review of the final NASA Agency-Wide
Recovery Act Plan and identified several compliance issues with
respect to fulfilling requirements of the OMB guidance. According to
the NASA IG memorandum, NASA's Agency-Wide Recovery Act Plan provided
insufficient detail about the agency's broad Recovery Act goals in
terms of outputs, outcomes, and expected efficiencies. In addition,
the plan did not include a projection of the expected rate of
competition nor a rationale for those numbers, as required by OMB
guidance. Lastly, the plan did not address the use of fixed-price
contracts as a percentage of all dollars spent or describe the steps
planned to maximize the use of fixed-price contracts where practicable
for Recovery Act-funded contracts. The memorandum was submitted to
NASA on December 17, 2009. In NASA management's response, received
January 5, 2010, the Recovery Act Implementation Executive stated the
agency concurred with the observations noted in this memorandum.
According to NASA management's response, at the time that the Agency-
Wide Recovery Act Plan was due for submission to OMB, Congress had not
concurred with NASA's proposed activities. NASA indicated in its plan
that it would provide this additional information with plan updates.
Small Business Administration:
SBA's mission is to maintain and strengthen the nation's economy by
aiding, counseling, assisting, and protecting the interests of small
businesses.
Key Recovery Act Programs:
The Recovery Act provides $730 million to SBA that the agency is using
to expand its lending and investment programs so that they can reach
more small businesses that need help. While most of SBA's Recovery Act
funds are used for loan programs, contracts are being awarded for
equipment and services to support these programs. Specifically, SBA
has allocated $20 million for improving technology. Most of the
contract dollars are being spent in this area. SBA program areas
receiving Recovery Act funding are listed in table 10.
Table 10: SBA Recovery Act Funds Allocation:
Program area: Loan programs;
Recovery Act funding: $660 million;
Purpose: Temporary elimination of fees on SBA-backed loans, a new loan
program to help small businesses meet existing debt payments, and
expansion of SBA's Microloan program.
Program area: Technology;
Recovery Act funding: $20 million;
Purpose: Technology systems to streamline SBA's lending and oversight
processes.
Program area: Staffing and Recovery Act oversight;
Recovery Act funding: $35 million;
Purpose: Additional staffing to meet demands for new programs and
funds for the SBA IG.
Program area: Surety Bonds;
Recovery Act funding: $15 million;
Purpose: SBA's Surety Bond Guarantee program.
Source: SBA.
[End of table]
Recovery Act Spending:
Through May 2010, SBA has obligated approximately $11 million of its
Recovery Act funds on contracts. SBA's quarterly obligations have
fluctuated. According to an SBA procurement official, this was
generally because of the award of large, individual contracts. Figure
11 shows SBA obligations of Recovery Act funds through contracts by
fiscal quarter.
Figure 11: SBA Obligations of Recovery Act Funds through Contracts, by
Fiscal Quarter:
[Refer to PDF for image: vertical bar graph]
Fiscal year quarter: Q3 FY09;
SBA Obligations of Recovery Act Funds: $2.31 million.
Fiscal year quarter: Q4 FY09;
SBA Obligations of Recovery Act Funds: $3.33 million.
Fiscal year quarter: Q1 FY10;
SBA Obligations of Recovery Act Funds: $1.14 million.
Fiscal year quarter: Q2 FY10;
SBA Obligations of Recovery Act Funds: $3.79 million.
Fiscal year quarter: Q3 FY10;
SBA Obligations of Recovery Act Funds: $5.79 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
SBA's use of existing and competed contracts was very different from
the other agencies we reviewed. Most of the funds that SBA obligated
under Recovery Act contract actions, about 76 percent, were obligated
on new contracts, as shown in figure 12 below. For the noncompetitive
new contract obligations, 76 percent were on actions awarded
noncompetitively under SBA's 8(a) program, 3 percent were on actions
awarded noncompetitively under simplified acquisition procedures, and
3 percent were on actions awarded noncompetitively because there was
only one source available. Two percent of new contracts were awarded
competitively.
Figure 12: SBA Recovery Act Obligations Competed and Types of
Noncompetitive Actions as of May 12, 2010 (Dollars in Millions):
[Refer to PDF for image: pie-chart and subchart]
Contract obligations:
Existing contracts: 24%;
New contracts: 76%:
* Competed: 2%;
* Noncompeted: 98%:
- 8(a) sole source: $6.3 million;
- Other: $1.5 million;
- Only one source: $0.2 million;
- Simplified acquisition procedures: $0.2 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation data as of May 12, 2010.
[End of figure]
Observations from the Site Review at SBA:
SBA is primarily using Recovery Act contracts to train, supply, and
equip staff to support other Recovery Act-related activities. Most of
SBA's Recovery Act contract dollars were obligated on contracts to
8(a) program businesses.
Consistent with the fact that agencies are not required to justify in
writing the use of noncompetitive contracting procedures for 8(a)
program contracts, these contract files were not required to contain a
justification document related to awarding a noncompetitive contract.
However, the files contained documentation that described the use of
the 8(a) program and included competitors' quotes to establish price
reasonableness.
Table 11 provides additional details on some noncompetitive contract
actions we reviewed at the SBA. These examples illustrate the variety
of services and supplies being acquired, the amount of Recovery Act
funding used, and the reason a contract action was not competed.
Table 11: Examples of Noncompetitive Recovery Act Contract Details
from the SBA Office of Business Operations Site Review:
Purpose: Advertising and marketing services for Recovery Act programs;
Recovery Act funding: $491,457;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: Awarded to an American Indian-owned small business.
Purpose: Program management and information technology services to
support pilot deployment of a system that maintains lender, small
business, and partner data;
Recovery Act funding: $1,287,701;
Reason contract action was not competed or is considered not
competed[A]: Task order on a pre-Recovery Act noncompetitive contract;
Notes: This task order was issued off of an existing IDIQ contract to
8(a) program business.
Purpose: A centralized commercial loan credit sourcing program;
Recovery Act funding: $245,391;
Reason contract action was not competed or is considered not
competed[A]: Modification on a pre-Recovery Act noncompetitive
contract;
Notes: This modification was issued off of an existing contract to
8(a) program business.
Purpose: An assessment of the Surety Bond Guarantee Program under the
Recovery Act;
Recovery Act funding: $35,976;
Reason contract action was not competed or is considered not
competed[A]: Modification on a pre-Recovery Act noncompetitive
contract;
Notes: This modification was issued off of an existing contract to
8(a) program business.
Purpose: Procuring software to perform Customer Relationship
Management and data warehousing functions;
Recovery Act funding: $1,827,567;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: The business selected for the contract was the only eligible
8(a) program business to submit a price quote.
Purpose: Wide Area Network optimization or acceleration technology
solutions and associated implementation services;
Recovery Act funding: $843,027;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: In seeking a business to perform this work, SBA performed
market research to identify businesses that could provide the most
appropriate technology solution possible while promoting the use of an
8(a) program business.
Purpose: Acquisition and procurement support at SBA headquarters,
including assistance with Recovery Act reporting requirements;
Recovery Act funding: $123,696;
Reason contract action was not competed or is considered not
competed[A]: Modification on a pre-Recovery Act noncompetitive
contract;
Notes: It was determined that SBA had a continuing need for this
support and therefore exercised an option year on a contract to an
8(a) program business.
Purpose: Software and services for the Customer Relationship
Management suite of applications;
Recovery Act funding: $71,122;
Reason contract action was not competed or is considered not
competed[A]: 8(a) program - under $3.5 million;
Notes: SBA conducted market research and found that the items were not
available under General Services Administration schedules.
Purpose: Provide training for Microloan intermediaries;
Recovery Act funding: $84,556;
Reason contract action was not competed or is considered not
competed[A]: Only one source available;
Notes: This contract was awarded under simplified acquisition
procedures.
Source: GAO analysis of SBA contract documents:
[A] Modifications or task orders on noncompetitive contracts existing
prior to Recovery Act are considered noncompetitive.
[End of table]
Agency Contracts Requiring Justifications for Noncompetitive Awards:
In a review of FPDS data as of February 19, 2010, we did not identify
any new, noncompetitive SBA contracts requiring a documented
justification and approval for being awarded noncompetitively.
Agency Contract Oversight:
SBA efforts to provide oversight and transparency for Recovery Act
activities include increased legal review of contract awards and
recipient reporting.
SBA has experienced a significant decrease in its acquisition
workforce and has contracted out for contract specialists.
SBA includes a legal review for all Recovery Act contract awards. This
review is not required for every non-Recovery Act award.
Inspector General Contract Oversight:
The SBA IG has received $10 million in Recovery Act funds for
oversight. The SBA IG's Recovery Act Oversight Plan highlighted
numerous efforts related to SBA's contract administration practices,
and oversight of Recovery Act loans and grants. In the contracting
area, the SBA IG's focus was on examining the award and administration
of $20 million in information technology contracts, and evaluating the
adequacy of SBA's acquisition workforce, expenditure controls, and
reporting of contract actions. In October 2009, the SBA IG added three
staff members to its contract audit group to provide additional audit
coverage of the procurement function.
The SBA IG has issued a memorandum to SBA's acquisition office
regarding their dramatic shortages in acquisition staff noting that
the staff decreased from 13 to 5 staff members in a short period of
time, straining the acquisition office's ability to issue and provide
oversight of Recovery Act contracts.
The SBA IG issued a report noting that there are numerous
discrepancies in the way that actions are being recorded in the FPDS-
NG. The SBA IG also issued another report that identified problems
with acquisition planning and eligibility for 8(a) program businesses
associated with two contracts for the Customer Relationship Management
suite of applications (see table 11).
[End of section]
Appendix III: Objectives, Scope, and Methodology:
Objectives:
GAO was asked to examine noncompetitive contract awards under the
American Recovery and Reinvestment Act of 2009 (Recovery Act). In
response, we conducted a review to determine:
* the extent to which Recovery Act funding was spent using contracts,
and to what extent these contract actions were awarded
noncompetitively;
* the reasons selected federal agencies awarded noncompetitive
Recovery Act contracts;
* the extent of oversight of Recovery Act contract actions at selected
federal agencies; and:
* state officials' level of insight into the use of noncompetitive
Recovery Act contracts within selected states.
Scope and Methodology:
We analyzed Federal Procurement Data System--Next Generation (FPDS-NG)
data to determine the extent to which Recovery Act funding was
obligated through contract actions across the federal government.
[Footnote 36] We determined that the FPDS-NG data were sufficiently
reliable for the purposes of this review by comparing the information
for selected agencies with information from other sources, including
agency contract data and information in contract files at selected
locations.[Footnote 37] As part of this analysis, we determined the
amount of Recovery Act obligations under new and existing contract
vehicles, as reported in FPDS-NG. Actions on the same underlying
contract were grouped together; orders and modifications to contracts
awarded after enactment of the Recovery Act were counted as occurring
under new contracts, while orders and modifications to contracts that
predated the Recovery Act were counted as existing contracts.
For our second and third objectives, we used FPDS-NG data to select
five agencies for more extensive review:
* Department of Defense (DOD):
* Department of Energy (DOE):
* Department of Health and Human Services (HHS):
* National Aeronautics and Space Administration (NASA):
* Small Business Administration (SBA):
These agencies were identified on the basis of the volume, dollar
value, and percentage of noncompetitive contract actions on which they
obligated Recovery Act funds, according to data drawn from FPDS-NG on
February 19, 2010. The size of the agencies was also considered.
Within each of the five agencies, we selected one contracting office
at which we reviewed contract files for noncompetitive Recovery Act
contract actions. As with the agencies, we chose these locations based
on the volume, dollar value, and percentage of noncompetitive Recovery
Act contract actions. The types of contract awards made at each
location were also considered. The five contracting offices selected
were:
* the U.S. Army Corps of Engineers (USACE) Sacramento District at DOD,
* the Office of Environmental Management Consolidated Business Center
at DOE,
* the National Institutes of Health (NIH) at HHS,
* the Johnson Space Center at NASA, and:
* the Office of Business Operations at SBA.
At each contracting office, we reviewed all noncompetitive contract
actions awarded or issued using Recovery Act funds, about 150 actions
in total. Because GAO and others have previously identified
shortcomings in FPDS-NG, we also asked agency officials to verify the
accuracy and completeness of our lists of noncompetitive contract
actions before our site visits. For each contract file, we reviewed
basic information on the contract award, such as the obligation
amount, as well as information on the award process, such as the
reason the contract was awarded noncompetitively. These reviews were
conducted on-site, except for that of NASA's Johnson Space Center, for
which we reviewed electronic versions of the contract files. We also
interviewed agency contracting officials at each location regarding
issues related to the contract files included in our review as well as
contracting under the Recovery Act as a whole.
In addition, using FPDS-NG data, we identified all new Recovery Act
contracts at the selected agencies that required documented
justifications and approvals authorizing the use of a noncompetitive
contracting approach, as of February 19, 2010. We limited our search
to new contracts with an award type of "Definitive Contract" in FPDS-
NG, and selected for review all those where the amount obligated
exceeded typical thresholds for requiring a documented justification--
$3.5 million for contracts with 8(a) program businesses, and $100,000
in most other cases. For each of the contracts, we obtained and
reviewed materials from the contract files related to the
justification for the noncompetitive award.
For each of the five selected federal agencies, we gathered
information on Recovery Act contracting oversight from interviews with
relevant officials, and reviews of relevant policies, reports, and
other documents. We obtained similar information from the agencies'
inspectors general (IG), including their audit plans related to
Recovery Act contracting. We also reviewed and analyzed applicable
findings the IGs have made regarding management and oversight of
Recovery Act contracting.
To determine the level of insight that state officials have into the
use of noncompetitive Recovery Act contracts, we selected five states--
California, Colorado, Florida, New York, and Texas--based on the
amount of Recovery Act funds reported as being awarded via contracts
on www.Recovery.gov and our goal of providing information on a variety
of geographic locations.[Footnote 38] These states account for more
than half of the Recovery Act funds awarded by contract at the state
level for the 16 states that we are monitoring as part of our
mandatory reporting on Recovery Act issues. For each state, we
discussed with the appropriate state officials--including
representatives from the governors offices, state procurement offices,
and audit organizations--the extent to which the states have awarded
noncompetitive Recovery Act contracts, the reasons why they did not
use competition, and the level of oversight the states provide for
these contracts.[Footnote 39] Additionally, we discussed these issues
with representatives of the state agencies that manage the education
and weatherization programs to obtain further understanding of how
state agencies award and oversee contracts. It is important to note
that states are not required to follow federal acquisition
regulations, including those covering the award of noncompetitive
contracts.
We conducted this performance audit from February 2010 to July 2010,
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix IV: Comments from the Department of Defense Inspector General:
Inspector General:
Department Of Defense:
400 Army Navy Drive:
Arlington, Virginia 22202-4704:
July 13, 2010:
Mr. John K. Needham:
Director:
Acquisitions and Sourcing Management:
U.S. Government Accountability Office:
Washington. DC 20548:
Dear Mr. Needham:
This is the Department of Defense Inspector General (DoD IG) response
to the Government Accountability Office draft report, "RECOVERY ACT:
Contracting Approaches and Oversight at Selected Federal Agencies and
States," dated July 9, 2010 (GAO Code 120886, GAO-10-809).
The DOD IG agrees with the draft report and its recommendation. As
part of our Phase 3 audit plan, we have updated our risk based
analysis based on results found during our Phase 1 and Phase 2 reviews
including our continuing coverage of future expected Recovery
Accountability and Transparency Board referrals relating to 8(a) firms.
We appreciate the opportunity to comment on the draft report.
Sincerely,
Signed by:
Daniel R. Blair:
Principal Assistant Inspector General for Auditing:
[End of section]
Appendix V: Comments from the Department of Energy Inspector General:
Department of Energy:
Washington, DC 20585:
July 13, 2010:
Mr. James Fuquay:
Assistant Director:
Government Accountability Office:
Via email: (fuqua@gao.gov):
Subject: Comments on the Draft Government Accountability Office Report:
Recovery Act: Contracting Approaches and Oversight at Selected Federal
Agencies and States (GAO-10-809):
Mr. Fuquay:
The Office of Inspector General appreciates the opportunity to comment
on the subject report. As we explained during our meetings with GAO
officials and as recognized in your draft report, the Office of
Inspector General employs a risk-based approach in determining how to
best use taxpayer furnished resources. For the Recovery Act, as with
all funds appropriated to the U.S. Department of Energy, we consider a
number of factors in determining where to apply our scarce audit
resources, not the least of which is the form and substance of the
contracting vehicle employed.
The U.S. Department of Energy is one of the most contractor dependent
agencies in the government. As a result, we incorporate the
examination of applicable contract instruments into each of our
audits. Regarding our Recovery Act strategy, we considered the subject
area during the completion of our risk assessment. However, as your
report states, we did not identify contracting as a Recovery Act high
risk area. One of the primary reasons was that the Department used a
significant portion of its Recovery Act funds to award grants, with
virtually all of the remainder dedicated to accelerating approved
scopes of work on existing contracts. As GAO notes in the Appendix to
its draft, less than one percent of funding was devoted to newly
awarded contracts, including those awarded to 8(a) firms. By virtually
every reasonable test, such amount is immaterial to the more than $38
billion in Recovery Act funding received by the Department.
With respect to use of Recovery Act funding, the GAO is correct in
stating that OIG spending has not reached anticipated levels. However,
the draft report fails to recognize that this was directly tied to
delays in the Department's program start/scale-up. As we have
identified in recently issued and several in-progress reviews,
significant spending by the Department on a number of major Recovery
Act projects/activities had only recently begun. As of June 30, 2010,
however, we had obligated about $6.2 million and expended over $1.7
million of the $15 million we were provided in Recovery Act funds. We
anticipate that our spending rate will significantly increase in the
near term as the OIG is currently using contract independent public
accountants and Federal Recovery Act specific employees to provide
support for a significant number of audits at the state and local
level.
Finally, the report recommends that as we revisit and revise our
Recovery Act audit plans, that we should assess the need for
allocating an appropriate level of audit resources, as determined
using our risk-based analysis, to non-competitive contracts awarded
under the 8(a) program. We do not disagree with the fundamental
premise of the recommendation; however, we do not believe that the
facts in this case provide a basis for it. As a matter of practice, we
routinely consider contracts of this nature and have completed a
number of audits in this area in the past. In fact, our Fiscal Year
2011 plan includes an audit start in this very area.
Should you have questions or desire to discuss the contents of our
response, please contact me at 202-586-1949.
Signed by:
Rickey R. Hass:
Deputy Inspector General for Audit Services:
Office of Inspector General:
U.S. Department of Energy:
CC: Tom Griffin, CF:
Diane Williams, CF:
Jacqueline Kniskern, MA:
[End of section]
Appendix VI: Comments from the National Aeronautics and Space
Administration Inspector General:
National Aeronautics and Space Administration:
Office of Inspector General:
Washington, DC 20546-0001:
July 15, 2010:
Mr. James Fuquay:
Assistant Director:
U.S. Government Accountability Office:
Washington, D.C. 20548:
Dear Mr. Fuquay:
Thank you for the opportunity to comment on the draft report,
"Recovery Act: Contracting Approaches and Oversight at Selected
Federal Agencies and States" (GA0-10-809), provided July 9, 2010. The
report recommends that the inspectors general of the five Federal
agencies reviewed assess the risks associated with the Small Business
Administration's 8(a) program as they move forward with Recovery Act
audit plans.
We concur with the recommendation and plan to assess the need for
allocating an appropriate level of audit resources to the non-
competitive contracts awarded under the 8(a) program. In fact, we
expect to begin an audit on NASA's achievement of Recovery Act
milestones under the cross-Agency support contracts at Johnson Space
Center. At least seven NASA contracts that we will be reviewing in
this audit were awarded under the 8(a) program.
Please express my appreciation to your staff for their time,
dedication, and professionalism. If you or your staff would like to
meet with us to discuss this matter further, please contact Jim
Morrison, Assistant Inspector General for Audits, at 202-358-0378.
Sincerely,
Signed by:
Paul K. Martin:
Inspector General:
[End of section]
Appendix VII: Comments from the Small Business Administration:
U.S. Small Business Administration:
Washington, D.C. 20416:
July 14, 2010:
John K. Needham, Director:
Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Needham:
The U.S. Small Business Administration appreciates the opportunity to
provide comments on the Government Accountability Office's (GAO)
report number GA0-10-809, entitled "Recovery Act: Contracting
Approaches and Oversight at Selected Federal Agencies and States." The
SBA is committed to working with agencies and small businesses to meet
the statutory small business contracting goals and providing
meaningful contracting assistance and business development
opportunities to all small businesses. At the same time, the agency is
committed to ensuring that its programs operate free of fraud, waste,
and abuse.
Especially in this challenging economic environment for small
businesses, the 8(a) program provides critical business development
opportunities for socially and economically • disadvantaged small
business owners. One of the SBA's primary goals is to ensure that the
benefits of the 8(a) program, including contracting assistance, flow
to the program's intended recipients. It is for this reason that the
SBA is concerned about some of the suggestions made about the 8(a)
program in this GAO report.
The report attempts to link agencies' legitimate use of the 8(a)
program through the Recovery Act to a previous forensic audit of the
8(a) program, GAO 10-425, "8(a) Program: Fourteen Ineligible Firms
Received $325 Million in Sole-Source and Set-Aside Contracts". This
report implies that contracts awarded through the 8(a) Business
Development program are more susceptible to fraud than other types of
contracts, and that the Inspector General's offices at agencies should
have more closely reviewed these contracts simply because they were
awarded through the 8(a) program.
As part of the agency's comprehensive approach to reducing fraud,
waste, and abuse in its programs, the SBA has taken significant steps
in each of the 8(a) program's three stages of compliance ” upfront
certification, ongoing monitoring, and rigorous enforcement. Many of
the agency's efforts have progressed significantly since the March
2010 release of the forensic audit, and as a result of the SBA's
actions, the 8(a) program will better deliver benefits to its intended
recipients.
In the area of upfront certification, the SBA has carefully examined
its certification procedures through its first comprehensive review of
8(a) regulations in over ten years. The agency has collected comments
from stakeholders and has held two tribal consultations and events in
ten cities in order to solicit a broad array of feedback. The agency
is currently reviewing all comments, and will issue its revised
regulations later this year.
In addition to revising 8(a) regulations, the SBA has also taken
additional steps to ensure firms' ongoing compliance. Consistent with
the GAO's recommendations in its previous forensic audit, content
experts in the SBA's Offices of Field Operations and Government
Contracting & Business Development have been developing a
comprehensive curriculum for all Business Development Specialists.
This training will focus on conducting more effective annual reviews,
resolving key eligibility issues, utilizing site visits more
effectively, and supporting staff in other key aspects so that SBA can
provide meaningful business development and reduce fraud, waste, and
abuse in the 8(a) program.
As part of its commitment to rigorous enforcement, the SBA has also
worked closely with both its Office of Inspector General and the
Department of Justice to review 8(a) firms suspected of fraud. The SBA
is currently reviewing the eligibility of those firms that were
suspected of fraud in the previous GAO report, while also ensuring
that these firms receive their due process. Although the SBA is
investigating the firms included in the prior GAO report's findings,
it is possible that not every company identified was acting
inappropriately. More broadly, based on the results of any
investigation, the SBA and the appropriate authorities are committed
to pursuing all appropriate courses of action ” whether suspension,
debarment, or prosecution ” against rims that have fraudulently
obtained government contracts through its programs.
Finally, while it is a priority for the SBA to rid all of its programs
of waste, fraud, and abuse, it is important to keep the findings of
the prior GAO report in context. The prior GAO report references $17
million in Recovery Act contracts that were given to companies that
potentially acted fraudulently. While this figure is concerning to the
SBA, this amount represents less than 1 percent of the 8(a) program's
annual contracting volume. Correlating the 8(a) program in its
entirety with at-risk contracting through the Recovery Act is
incomplete.
Suggestions of wrong-doing without supporting evidence are detrimental
to the 8(a) program and its thousands of eligible program
participants. The 8(a) program is a legitimate business development
tool with a contract vehicle that was enacted by Congress and was a
viable procurement option for Recovery Act contracting. The SBA has
taken significant steps to reduce fraud, waste, and abuse in the 8(a)
program, and disputes this report's suggestion that the 8(a) program
was an inappropriate or relatively risky procurement choice.
If you have any additional questions or comments, please feel free to
contact me directly.
Sincerely,
Signed by:
Joseph G. Jordan:
Associate Administrator:
Office of Government Contracting and Business Development:
[End of section]
Appendix VIII: Comments from the State of Florida:
State Of Florida:
Office Of The Governor:
Charlie Crist, Governor:
The Capitol:
Tallahassee, Florida 32399-00111:
www.fl.gov.com:
850-488-7146:
850-487-0801 fax:
July 13, 2010:
Mr. James Fuquay, Assistant Director:
Acquisition and Sourcing Management:
United States Government Accountability Office:
Washington, DC 20548:
Dear Mr. Fuquay:
The State of Florida Inspectors General have reviewed your proposed
report entitled Recovery Act: Contracting Approaches and Oversight at
Selected Federal Agencies and States (GAO-10809).
We agree with the information presented in the report about Florida
and therefore do not have any comments or concerns.
We also would like to thank your staff for their efforts and cordial
working relationship. If you need additional information, please
contact Kim Mills, Director of Auditing, at (850) 922-4637.
Sincerely,
Signed by:
[Illegible], for:
Melinda M. Miguel:
Chief Inspector General:
[End of section]
Appendix IX: Comments from the State of Texas:
State of Texas:
Office Of The Governor:
Rick Perry, Governor:
Post Office Box 12428:
Austin, Texas 78711:
(512) 463-2000 (Voice):
Dial 7-1-1 For Relay Services:
Visit: [hyperlink, http://www.TexasOnline.com]
July 13, 2010:
Mr. John K. Needham:
Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, D.C. 20548:
Dear Mr. Needham:
Thank you for the opportunity to review and comment on the draft
report, Recovery Act: Contracting Approaches and Oversight at Selected
Federal Agencies and States (GAO-10-809), which includes Texas as one
of five states reviewed.
We suggest these changes:
* On page 23 modify the second bullet point as follows: "Texas's state-
wide contract database does not identify which contracts are funded
under the Recovery Act. However, the state does have a separate
database to track Recovery Act awards made to state agencies and
public institutions of higher education."
* On page 25, 2nd paragraph: "At the state level”unlike the federal
level”Congress provided no Recovery Act funds [strikeout text] were
not specifically set aside [end strikeout] to states or their for
state audit organizations to provide oversight [strikeout text] over
the use of [end strikeout] Recovery Act funds."
* On page 27 under "Recommendation" add this as the last sentence:
"Congress should provide states the resources to accomplish the tasks
that Congress has required of state and local governments."
Texas remains committed to complying with the requirements of the Act.
We look forward to continued work with the GAO on this effort.
Sincerely,
Signed by:
Mike Morrissey:
Senior Advisor:
Office of the Governor:
[End of section]
Appendix X: GAO Contact and Staff Acknowledgments:
GAO Contact:
John K. Needham, (202) 512-4841 or needhamjk1@gao.gov:
Acknowledgments:
In addition to the contact named above, William T. Woods, Director;
James Fuquay, Assistant Director; Shea Bader; Noah Bleicher; M. Greg
Campbell; MacKenzie Cooper; Alexandra Dew; R. Eli DeVan; Kevin Heinz;
W. Keith Hudson; Julia Kennon; Jean K. Lee; Teague Lyons; Jean
McSween; Norm Rabkin; Morgan Delaney Ramaker; and Russ Reiter all made
contributions to this report.
[End of section]
Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] For the purposes of this report, for federal agencies, we are
defining non-competitive contracts to include contracts that were
awarded using the exceptions to full and open competition in the
Federal Acquisition Regulation (FAR), such as sole-source contracts
awarded under the Small Business Administration's 8(a) program, as
well as contracts awarded without competition under simplified
acquisition procedures, as authorized by FAR § 13.106-1. For states,
we are relying on the states' definitions of non-competitive contracts
as discussed with state officials. As such, each state may have its
own definition of a non-competitive contract.
[3] FPDS-NG is a comprehensive, Web-based tool and database that
functions as a clearinghouse of information for all federal contract
actions, including non-competitive and competitive actions, exceeding
the micro-purchase threshold, which in most cases is $3,000.
[4] Our previous work, as well as the work of the federal Acquisition
Advisory Panel, has identified limitations in the accuracy and
timeliness of data in FPDS-NG. Both GAO and the Acquisition Advisory
Panel have reported that while FPDS-NG has been the primary
governmentwide contracting database for capturing and reporting on
various acquisition topics, such as agency contracting actions and
procurement trends, it has had data quality issues over a number of
years. While FPDS-NG data are useful for providing insight, the data
are not always accurate at the detailed level. However, no other
viable alternative currently exits for obtaining governmentwide data
on federal procurements. See GAO, Federal Contracting: Observations on
the Government's Contracting Data Systems, [hyperlink,
http://www.gao.gov/products/GAO-09-1032T] (Washington, D.C: Sept. 29,
2009) and Federal Acquisition: Oversight Plan Needed to Help Implement
Acquisition Advisory Panel Recommendations, [hyperlink,
http://www.gao.gov/products/GAO-08-160] (Washington, D.C.: Dec. 20,
2007).
[5] The data reported on www.Recovery.gov represents the data reported
by recipients of Recovery Act funds within the states. Our previous
work has identified concerns with the quality of these data; however,
this Web site is the only source of data available on states' Recovery
Act contracting awards. See GAO, Recovery Act: States' and Localities'
Uses of Funds and Actions Needed to Address Implementation Challenges
and Bolster Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-604] (Washington, D.C.: May 26,
2010).
[6] Recovery Act funds that were awarded directly to local
governmental entities by federal agencies and bypassed state agencies
were not included in the scope of our state-level work addressing
oversight. These funds would include formula and discretionary grant
programs.
[7] Office of Management and Budget, "Initial Implementing Guidance
for the American Recovery and Reinvestment Act of 2009," M-09-10,
February 18, 2009.
[8] Office of Management and Budget, "Updated Implementing Guidance
for the American Recovery and Reinvestment Act of 2009," M-09-15,
April 3, 2009.
[9] Other exceptions to awarding government contracts using
competitive procedures include: when competition would compromise
national security; when an agency head determines competition is not
in the public interest; when competition is precluded by the terms of
an international agreement or a treaty between the United States and a
foreign government or international organization; and to maintain a
supplier base in case of a national emergency or to achieve industrial
mobilization, to establish or maintain an essential engineering,
research, or development capability, or to acquire the services of an
expert or neutral person for any litigation or dispute.
[10] Federal agencies may request that SBA allow them to make a
competitive 8(a) award below the competitive threshold, but, per the
FAR, such requests should be approved only on a limited basis.
[11] Office of Management and Budget, M-09-10, February 18, 2009.
[12] GAO, Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580]
(Washington, D.C.: Apr. 23, 2009).
[13] According to USACE officials, these timeframes generally pertain
to construction contracts awarded for less than $3.5 million.
[14] GAO has identified a number of issues associated with contracts
awarded under the 8(a) program. GAO, Small Business Administration:
Steps Have Been Taken to Improve Administration of the 8(a) Program,
but Key Controls for Continued Eligibility Need Strengthening,
[hyperlink, http://www.gao.gov/products/GAO-10-353] (Washington, D.C.:
Mar. 30, 2010); 8(a) Program: Fourteen Ineligible Firms Received $325
Million in Sole-Source and Set-Aside Contracts, [hyperlink,
http://www.gao.gov/products/GAO-10-425] (Washington, D.C.: Mar. 30,
2010); and Contract Management: Increased Use of Alaska Native
Corporations' Special 8(a) Provisions Calls for Tailored Oversight,
[hyperlink, http://www.gao.gov/products/GAO-06-399] (Washington, D.C.:
Apr. 27, 2006).
[15] The FAR does not require a documented justification for not
competing contract actions under the 8(a) program or for certain
contracts awarded using simplified acquisition procedures.
[16] For more information about the Recovery Accountability and
Transparency Board's coordination efforts for the IG community, see
[hyperlink, http://www.gao.gov/products/GAO-10-604] and GAO, Recovery
Act: One Year Later, States' and Localities' Uses of Funds and
Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C.: Mar. 3,
2010), and Recovery Act: Contract Oversight Activities of the Recovery
Accountability and Transparency Board and Observations on Contract
Spending in Selected States, [hyperlink,
http://www.gao.gov/products/GAO-10-216R] (Washington, D.C.: Nov. 30,
2009).
[17] Office of Management and Budget, M-09-15.
[18] Earned value management measures the value of work accomplished
in a given period and compares it with the planned value of work
scheduled for that period and with the actual cost of work
accomplished.
[19] Recovery Accountability and Transparency Board, Review of
Contracts and Grants Workforce Staffing and Qualifications in Agencies
Overseeing Recovery Act Funds (Washington, D.C., March 2010).
[20] As of June 2010, HHS had obligated about $88 billion of Recovery
Act funds, of which only $1.9 billion was for contracts.
[21] See Small Business Administration, Office of Inspector General,
SBA's Planning and Award of the Customer Relationship Management
Contracts, ROM 10-16 (Washington, D.C., June 29, 2010).
[22] [hyperlink, http://www.gao.gov/products/GAO-10-353].
[23] [hyperlink, http://www.gao.gov/products/GAO-10-425].
[24] [hyperlink, http://www.gao.gov/products/GAO-06-399].
[25] Air Force Audit Agency, American Recovery and Reinvestment Act of
2009 Program Requirements, 3rd Wing, Elmendorf Air Force Base, AK,
F2010-0022-FBN000 (Spanaway, WA: Dec. 10, 2009).
[26] Small Business Administration, Office of Inspector General,
Memorandum on the Adequacy of Procurement Staffing and Oversight of
Contractors Supporting the Procurement Function, ROM-I0-13
(Washington, D.C.: Apr. 9, 2010).
[27] For the purposes of this report, we consider state-level
oversight as centralized state government offices with purview over
more than one state agency or department. This includes each
governor's office and state controller offices. State agency-level
oversight refers to an individual state agency that provides oversight
of state activities under the purview of the state agency and possibly
oversight over local government activities and entities receiving
funds from that agency. We define local levels as local governments of
the counties, cities, towns, or municipalities and other local
governing entities, such as local education agencies and community
action agencies.
[28] The Recovery Act did not provide for or set aside funds that the
states were to use to conduct oversight. However, subsequent to the
passage of the Recovery Act, OMB issued OMB Memorandum M-09-18'
"Payments to State Grantees for Administrative Costs of Recovery Act
Activities," dated May 11, 2009, which provided flexibilities for
states to use already existing procedures under an expedited process
to recover administrative costs. The guidance was intended to help the
states quickly and effectively build the necessary capacities to meet
their responsibilities under the Recovery Act. Procedures for
recovering costs were initially set out in OMB Circular A-87, Cost
Principles for State, Local and Indian Tribal Government, dated August
29, 1997.
[29] We previously reported that the District of Columbia and the 16
states for which GAO is monitoring Recovery Act issues are facing
reduced staffing levels caused by budget challenges. See GAO-10-604.
[30] For the purposes of this report, we define the state audit
organizations to include each state's official audit entity, such as
the auditor general or state auditor as well as state IG offices. Some
states have both a state audit organization and agency IGs. For
example, Florida has an Auditor General, who covers state and local
government entities and agency IGs; whereas Texas has a State Auditor,
who covers state agencies, and agency IGs.
[31] The Single Audit Act requires states, local governments and
nonprofit organizations expending over $500,000 in federal awards in a
year to obtain an audit in accordance with requirements set forth in
the act. The Single Audit is also known as the OMB A-133 audit. For
the Single Audit, auditors identify the applicable federal programs,
including "major programs," to be reviewed based on risk criteria,
including minimum dollar thresholds. OMB has 14 requirements that
generally are to be tested for each major federal program to opine on
compliance and report on significant deficiencies in internal control
over compliance with each applicable compliance requirement.
[32] [hyperlink, http://www.gao.gov/products/GAO-10-604].
[33] FAR § 16.504 permits contracts that provide for an indefinite
quantity, within stated limits, of supplies or services during a fixed
period. Contracting officers may use an indefinite-quantity contract
when the government cannot predetermine, above a specified minimum,
the precise quantities of supplies or services that the government
will require during the contract period, and it is inadvisable for the
government to commit itself for more than a minimum quantity.
[34] The remaining $4 billion of DOE Recovery Act funding was through
credit subsidies.
[35] Earned value management measures the value of work accomplished
in a given period and compares it with the planned value of work
scheduled for that period and with the actual cost of work
accomplished.
[36] FPDS-NG is a comprehensive, Web-based tool and database that
functions as a clearinghouse of information for all federal contract
actions, including non-competitive and competitive actions, exceeding
the micropurchase threshold, which in most cases is $3,000.
[37] Our previous work, as well as the work of the federal Acquisition
Advisory Panel, has identified limitations in the accuracy and
timeliness of data in FPDS-NG. Both GAO and the Acquisition Advisory
Panel have reported that while FPDS-NG has been the primary
governmentwide contracting database for capturing and reporting on
various acquisition topics, such as agency contracting actions and
procurement trends, it has had data quality issues over a number of
years. While FPDS-NG data are useful for providing insight, they are
not always accurate at the detailed level. However, no other viable
alternative currently exists for obtaining governmentwide data on
federal procurements. See [hyperlink,
http://www.gao.gov/products/GAO-09-1032T] and [hyperlink,
http://www.gao.gov/products/GAO-08-160].
[38] The data reported on www.Recovery.gov represent the data reported
by recipients of Recovery Act funds within the states. Our previous
work has identified concerns with the quality of these data; however,
this Web site is the only source of data available on states' Recovery
Act contracting awards. See [hyperlink,
http://www.gao.gov/products/GAO-10-604].
[39] Recovery Act funds that were awarded directly to local
governmental entities by federal agencies and bypassed state agencies
were not included in the scope of our state-level work addressing
oversight. These funds would include formula and discretionary grant
programs.
[End of section]
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