GSA investigation documents widespread contract abuse

In a detailed report totaling more than 400 pages, the General Services Administration's internal investigator has documented widespread and apparently systematic misuse of contracts and skirting of laws and regulations at the agency.

The GSA inspector general, in an audit released Thursday, identified a series of irregularities across the country that, collectively, undermined the federal procurement process, the report said.

The review examined 11 regional offices of GSA's Federal Technology Service, which buys technology goods and services on other agencies' behalf. FTS built a reputation on providing procurement skills to the government. However, the IG's report shows FTS employees didn't follow established rules for how contracts are awarded, executed and ultimately managed.

Hundreds of millions of dollars in contract awards didn't follow laws and regulations, the IG reported. After a review that lasted most of this year, the IG found repeated irregularities, including:

• FTS employees used contracts to buy goods and services for which those contracts weren't designed.
• Competition for work was sometimes inadequate. Some companies acted as "middlemen" by passing along most of the work they won to other firms that were hand-picked by FTS' client agencies.
• Contract administration was "ineffective" or "nonexistent."
• Descriptions of work were sometimes "misleading."
• Contracts were frequently awarded without proper documentation justifying the reasonableness of the prices the government was paying.

In addition, the IG found inappropriate use of a fund set aside for FTS to use for information technology purchases, known as the IT Fund. The IG identified 38 task orders totaling more than $571 million for work such as environmental cleanup, administration, training, and consulting and financial management activities paid for from the IT Fund, which consists of money placed there by FTS' agency customers.

"Several factors contributed to the problems" at FTS, the IG reported, including "an ineffective system of internal management controls, an environment that emphasized client agency satisfaction and a culture that emphasized revenue growth."

Because FTS receives no congressional appropriations to run its operations, it subsists on the fees it charges its government clients. The agency has also awarded bonuses to some employees for generating business for the unit.

The IG stopped short of making any recommendations on the future of FTS. But government and industry observers speculate that the agency will be merged with another arm of GSA, the Federal Supply Service, which doesn't provide the customer-centered approach to procurement for which FTS has become well-known.

The chairman of the congressional committee overseeing GSA's operations indicated that he will consider a "permanent reorganization" of the agency next year. A spokesman for House Government Reform Committee Chairman Tom Davis, R-Va., said, "GSA must get its house in order...Because of the IG's revelations of procurement irregularities at FTS, Chairman Davis will be reviewing options to resolve the agency's structural and management challenges...If this requires that we mandate a permanent reorganization within GSA, Chairman Davis is prepared to take whatever action is needed, including the introduction of legislation that will do so."

On the other side of Capitol Hill, Sen. Charles Grassley, R-Iowa, who chairs the Finance Committee, said, "It's upsetting that many of the problems identified a year ago by the inspector general…were found to be problems in almost every region of the country. It's obvious that there have been serious weaknesses in both the systems and the management at the General Services Administration."

For their part, GSA officials characterized the IG's findings as unsurprising. In a press conference Friday, they said they'd been aware of similar problems in some regional offices based on previous audit reports. Since then, they've begun a campaign to educate employees about the procurement process, they said.

FTS Commissioner Sandra Bates said the portion of the report documenting actions before those corrective measure were taken was "looking in the rear-view mirror."

"I believe that we have turned the corner," Bates said.

GSA's deputy administrator, David Bibb, seconded that notion, saying there were "no surprises" in the IG's report.

The IG applauded agency management for GSA's "Get it Right" campaign to educate employees. But a review of recent contracts in the report was limited, and the IG found that some problems still persist, specifically a lack of proper documentation in some contract files.

The GSA officials' reactions differed appreciably from their earlier remarks about employee misdeeds, which first came to light in August 2003 when the IG reported on an FTS regional office in Bremerton, Wash. At that time, senior managers indicated the actions of a few employees didn't reflect upon the agency as a whole. In congressional testimony, officials sought to portray those employees' activities as aberrant.

But while the IG's latest report notes that the frequency and significance of procurement irregularities differed from region to region, the irregularities were observed in every region, and often the same kinds were seen more than once.

In their press conference, GSA's leaders didn't call the irregularities isolated, but they avoided any indication that abuses were prolific. "Inferring that there's an epidemic," Bibb said, "is going too far."