A third of the vendors with General Services Administration schedules services contracts provided unqualified employees for the job, resulting in overcharges for professional services, according to a new audit.

The companies allegedly provided workers who did not meet the government’s minimum level of experience or education.

The GSA Office of Inspector General reviewed 53 Multiple Award Schedules (MAS) preaward contracts dating from fiscal 2011. The combined ceiling value was $8 billion. All reviews occurred before pending five-year option periods.

Out of 21 service contracts audited, there were 7 instances (33%) in which contractors charged for labor that did not meet the specifications in their contracts.

“GSA customers were overcharged for professional services,”the March 8 audit stated. “The employees contracted to provide these services did not have the minimum educational and/or experience qualifications proposed by the vendor and required by their contracts,” the auditors wrote.

In one case, 43% of a vendor’s employees assigned to schedule task orders did not meet the specified qualifications. The company was not named.

“GSA customers were overcharged for professional services.”

The situation worsened since the previous year, in which 27% of the audited vendors did not provide workers with the required education or experience.

The inspector general suggested that federal contracting officers may not realize the extent or full ramifications of the problem and recommended “appropriate action” to ensure that labor qualifications are met.

In other findings, auditors said 69% of the vendors reviewed in FY 2011 had flawed or limited commercial sales practices information that made it difficult to assess fair and reasonable pricing. Many of those had inadequate systems for handling and reporting the data.

That was a slight improvement from fiscal 2010, in which 83% had incomplete commercial sales data.

Gaps in reported prices caused GSA clients to pay higher prices, the report said. With just one vendor, GSA missed out on up to $77 million in savings over five years, based on a calculation assuming discounts comparable to those the vendor gave to non-GSA agencies, the inspector general said.

In another finding, auditors said that more than a third of the contracts were to vendors with minimal or no commercial sales. That gap allegedly made it difficult for agencies to “benefit from pricing changes in the marketplace,” the IG wrote.

In addition, the IG said GSA collected only part of of the Industrial Funding Fees that would have been owed if contractors accurately reported all schedule sales and computed the fee correctly. The funding fee is a .75% charge to cover the operating costs of the GSA schedules.

In one case, a company reported only 12% of GSA sales, underpaying fees by about $84,000. “Recurrence of this issue throughout the ($38 billion) schedules program would have a major monetary impact,” the IG wrote.

The audit report has received some mixed reviews. Maureen Jamieson, vice president, Centre Consulting, agreed more attention is needed on pricing data, but she noted several areas of concern.

For example, little or no commercial sales are not necessarily a problem, Jamieson wrote in a blog entry: “We do not agree that this deprives GSA of the ability to negotiate fair and reasonable prices based on open market Government sales.”

Furthermore, she questioned the advice on meeting all labor requirements.

“Given the drive toward placing service orders on a firm fixed price basis, we at Centre question whether such a focus can translate into better MAS pricing or cost savings to the customer. In our experience, in which low price technically acceptable contract awards are prevalent, we believe that vendors are already engaging in aggressive ‘price to win’ bid strategies,” Jamieson wrote in the blog.

The report said contracting officers negotiated $86 million out of $240 million in recommended cost avoidances. An IG spokeswoman said the cost avoidances, while dealing with pricing and labor, were not aligned with the categories described in the report.

More information: GSA OIG report: http://goo.gl/THxte