Did CDC violate contract rules? Agency, auditors disagree

Dispute is over $106 million alleged 'personal services' contract

The Health and Human Services Department’s inspector general has accused the Centers for Disease Control and Prevention of violating federal contracting rules  in CDC's administration of a $106 million professional services contract, according to a new report.

The case involves a CDC contract that HHS IG Daniel Levinson alleges was a personal services pact prohibited by the Federal Acquisition Regulation. CDC officials are disputing the allegation and defending their handling of the contract.

Under the federal rule, "personal services" are defined as those in which an employer-employee relationship is created between the government and contractor personnel. Factors to be considered include whether the contract worker is subject to relatively continuous supervision by agency personnel, whether the contractor performs the work on site, whether the government furnishes the equipment and tools, whether the work carries out the agency’s mission, and whether the need for the service can be expected to last beyond one year.

Under federal rules, agencies that hire contractors for personal services are circumventing federal civil service hiring. Such contracts are prohibited except in special cases.

Levinson audited a 2003 CDC contract for management and consulting services awarded to an unidentified minority- and woman-owned professional services certified small business contractor. The contractor subsequently received 149 task orders totaling $106 million from 2003 to 2008.

The IG’s audit covered eight task orders valued at $18.9 million, which required an estimated 110 contractor personnel.

Levinson concluded that CDC inappropriately administered all eight task orders as personal service contracts. “By using contractor personnel for personal services, CDC violated the Federal Acquisition Regulation,” Levinson wrote. The Jan. 11 IG report recommends that CDC further evaluate its contracts for compliance and institute additional policies and procedures.

However, in written comments to the draft report, CDC Director Dr. Thomas Frieden said the contract in question was not a personal service contract.

“The contract in question was neither structured nor administered as a personal services contract by the CDC,” Frieden wrote. “We recognize that there may be instances where the actions of federal employees may have contributed to creating the appearance of one or more personal services indicators. But the totality of these circumstances do not rise to the level of the contract relationship being for personal services, and we do not believe the contracts were regularly administered as personal services."

Levinson, in a response to Frieden, maintains that the CDC violated federal rules.

The CDC did not address the key elements identified in the audit, Levinson wrote. “Most significantly, CDC did not address our finding that its employees had provided relatively continuous supervision and control of on-site contractor personnel. CDC also did not address our findings on on-site contractor performance, equipment and supplies furnished to contractor personnel, services necessary to accomplish CDC’s mission, and services needed beyond one year. When considered together, these findings demonstrate that CDC violated the Federal Acquisition Regulation,” Levinson wrote.

The CDC is responsible for the federal public health education and response. In recent months, the agency has been awarding contracts for surveillance of swine flu infections.

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