GAO: "Little Attention to Sound Contracting Practices" in DOD's Use of Franchise Funds In its latest attack on Defense Department procurement practices, the Government Accountability Office lambasted the department’s use of the franchise funds GovWorks and FedSource. After reviewing a sample of DOD purchases through the funds in 2003, GAO concluded, “DOD, GovWorks and FedSource paid little attention to sound contracting practices, for which they shared responsibility to help ensure value.” GovWorks, operated by the Interior Department, and FedSource, run by Treasury, are fee-for-service contracting shops. The Defense Department is their largest customer, accounting for about two-thirds of the revenue for each fund in 2004. “In the absence of clear guidance on the proper use of other agencies’ contracting services, DOD customers did not perform analyses of contracting alternatives and chose to use the franchise funds on the basis of convenience rather than as part of an acquisition plan,” GAO said. GAO said the franchise funds often did not get competitive bids, did not ensure that prices were fair and reasonable and did not adequately monitor contractor performance. When FedSource placed orders against GSA schedules, the investigators found, it did not abide by DOD regulations requiring that it seek at least three bids. Both GAO and Congress have long been critical of the Defense Department’s heavy use of interagency contracting, including franchise funds, governmentwide acquisition contracts and GSA schedules. GAO has placed DOD’s interagency contracting on its high-risk list of programs that are vulnerable to waste, fraud and abuse. The investigators recommended increased monitoring and oversight of the franchise funds by their parent departments and by the Office of Management and Budget. The Interior and Treasury departments said they have already implemented some of the recommendations. DOD said it issued guidance to buyers last October to set procedures to determine whether the use of interagency contracting for a particular requirement was in the best interest of the government, but GAO said the guidance was too vague. The report, GAO-04-456, is available at www.gao.gov.