IG Finds More Contracting Abuses in Technology Service Contracting officers at the General Services Administration’s Federal Technology Service routinely ignored procurement laws and regulations, handed sole-source contracts to favored companies and left the government open to “waste, fraud and abuse,” GSA’s inspector general reported. The IG report documented hundreds of millions of dollars in contracts that were improperly awarded. Many of them were 8(a) sole-source contracts that may have cost the government millions in overcharges. The audit grew out findings of improprieties in the Bremerton, WA, regional client support center, which was shut down last year. (SAA, 10/17/03) The new report, released Jan. 9, also examined regional centers in Kansas City, MO, and Atlanta. The Federal Technology Service buys information technology products and services for other government agencies, most notably the Defense Department. But the auditors found that FTS improperly paid for construction and other non-IT services out of its accounts. Among the improprieties cited by the auditors were “sole-source awards, misuse of small business contracts, allowing work outside the contract scope, improper order modifications, frequent inappropriate use of time and materials task orders, and not enforcing contract provisions.” The auditors found that FTS contracting officers often did what their clients wanted, even if it violated procurement laws and regulations. They said ineffective internal management controls and a system of bonuses based on revenues contributed to the breakdown. FTS Commissioner Sandra Bates said the agency is already taking action to strengthen its internal controls, examine its system for awarding bonuses and retrain personnel. Senate Finance Committee Chairman Charles Grassley (R-IA) called for “a thorough housecleaning of FTS.” In a letter to GSA Administrator Stephen Perry, he said the three regional offices “give every appearance of having run virtually unchecked and amuck, and have committed almost every conceivable contracting irregularity.” He asked for audits of the other eight regional offices; GSA said that is already in progress. More than half of task orders examined by the auditors were sole source and “a substantial number” were improper, the IG report says. “We concluded that, particularly in the case of professional services, the client had a vendor in mind before coming to GSA, and the prevalence of single-source justifications suggests that many clients were not interested in competing the requirement,” the auditors found. “…As a result, the government did not obtain the benefits of competition and potentially lower costs.” Seventy of 86 task orders and contracts awarded to 8(a) firms were found to be improper. In some cases the 8(a) firm contracted out the vast majority of the work; in others, procurements were split to avoid exceeding the $3 million limit for sole-source services contracts. These practices “likely resulted in increased costs,” the auditors said. “FTS used 8(a) contractors under the sole-source provisions of FAR 19.805-1 to procure defense systems, marine installation services, and construction and renovation of buildings,” even though the contracts were supposed to be limited to IT work. Many of the abuses involved the FAST contract, an 8(a) set-aside governmentwide acquisition contract managed by FTS’s Kansas City office. FTS used money from its IT fund to buy boat barriers, including anchors, buoys and chains, to protect U.S. Navy installations in the Mediterranean. An 8(a) systems integration firm, Northern NEF Inc., was awarded the contract. FTS directed more than $53 million to Northern NEF, which then passed through 100% of the work to a subcontractor and collected $2.6 million in fees as the order administrator. The subcontractor was recommended by the Navy. The auditors described that as “a clear abuse of the 8(a) program.” They added, “Millions of dollars were wasted by compensating the contractor for doing little more than placing orders with other favored contractors to do the actual work” (Northern NEF has since been acquired by a large company.) To further avoid competition, FTS added additional work to task orders and extended the length of contracts. In one case, an $11 million contract for software engineering ballooned to $58 million through modifications and extensions. The regional centers “approved agency justifications to limit competition with little scrutiny or effort to obtain additional sources,” the report said.