DOD IG: Interagency contracting rife with problems

Purchases Made Through the Department of the Interior

The Defense Department often uses interagency contracts to circumvent basic contracting practices and spend expired funds, according to the DOD Inspector General’s office. DOD is also failing to properly manage and monitor its own service contracts, the office found.

The DOD IG’s office recently released a series of reports citing numerous abuses in DOD purchases made through the General Services Administration, the Interior Department, NASA, and the Treasury Department. Contracting officials have awarded numerous contracts without competition or price evaluations. Planning and oversight were lacking in almost all cases, the reports stated.

“These problems put the Department of Defense dollars at risk,” said Sen. Daniel Akaka (D-Hawaii), the new chairman of the Senate Armed Services’ Readiness and Management Subcommittee, which held a Jan. 17 hearing on DOD procurement practices.

DOD officials failed to do adequate planning in 55 of 56 task orders placed through GSA and all 61 task orders place through Interior that the IG reviewed. DOD didn’t properly monitor contractor performance for 54 of 56 and 23 of 24 orders awarded through those agencies, respectively.

Similar problems occurred when defense contracting officials used DOD contracts, the IG’s office reported. In reviewing $7.6 billion worth of contracts, auditors found that 90 percent lacked proper cost estimates and 60 percent had no plans to monitor performance.

Overall, DOD obligations for service contracts have grown from $83 billion in fiscal year 2000 to over $140 billion in fiscal 2005. Also, the contractor workforce has almost doubled in that time, from 730,000 to 1.3 million contractor employees.

Meanwhile, the DOD acquisitions workforce is shrinking, down 27 percent between 1999 and 2004. “These trends long ago passed the point where our acquisitions workforce lost the capacity needed to perform its essential function,” Akaka said.

Also, IG has reported 72 potential violations of the Anti-Deficiency Act, where other agencies made purchases using expired DOD funds, in violation of the law and department policy. Acting IG Thomas Gimble said $400 million of those funds should have been returned to the U.S. Treasury and no one has been held accountable to date.

“DOD continues to use other government agencies to make poorly planned purchases with annual appropriations about to expire,” Gimble said. DOD also uses federal supply schedules and credit cards improperly, costing millions in surcharges, he said.

DOD frequently uses the procurement services of GSA, Interior and other agencies to make purchases rather than setting up their own contracts, But GSA and Interior contracting officers often failed to compete the contracts, determine best prices, monitor the services delivered and obtain needed approvals, the IG found.

DOD and the other agencies are taking some steps to clean up interagency contracting, Gimble said. For example, DOD and GSA signed a memorandum of agreement in December to coordinate efforts on 22 basic contracting management controls. But these problems have plagued DOD for years, he added.

Katherine Schinasi, managing director for acquisition and sourcing at the Government Accountability Office, told senators that fraud, waste, and abuse caused by DOD’s poor contracting management costs hundreds of millions of dollars each year.

GAO has found numerous unjustified sole-source awards coming from DOD. “The professed need for speed too often wins out over holding competitions,” she said, creating “outcomes that are not in the best interests of the government.”

One-third of DOD service contracts that GAO reviewed did not have adequate monitoring. Also, DOD often defines requirements poorly, making proper assessment impossible. This is due to an understaffed and undertrained acquisitions workforce at DOD, the IG reported.

“DOD’s workforce does not have the business acumen needed in today’s environment,” Schinasi testified. DOD has also contracted out many services that were previously performed in-house, such as pricing and systems engineering, she said.

“The debate on which parts of DOD’s mission can best be met through buying contractor services has not taken place,” and senior leaders often leave DOD before addressing these long-term institutional problems, she added.

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