Defense IG to release reports on interagency contracting problems

Faulty contracting practices and violations of a law on federal spending will be the subject of five reports to be released in August by the Defense Department inspector general's office, a Defense official told an acquisition advisory group Thursday.

Terry McKinney, program director for the contract management directorate at the Defense Department's IG office, said the office is completing work on four separate reports on Defense contracts placed through the General Services Administration, procurement centers at the Interior and Treasury departments, and NASA.

A fifth report will focus on about 70 violations of the Anti-Deficiency Act uncovered in fiscal 2005 and also will address about 38 violations from fiscal 2004 that were previously disclosed, he said. The Anti-Deficiency Act prevents agencies from spending funds in excess of a given appropriation.

McKinney ran through a long list of contracting problems that will be detailed in the interagency contracting reports, including requests that indicated which contractor was preferred for the award, a high level of awards to incumbents, a large number of sole source contracts, high-value contracts awarded without competition to Alaska Native corporations, buildings leased without going through GSA and substantial overpayments by agencies in order to "bank" funds for future charges.

He described one contract in which Defense paid the Treasury Department $1 million to cover a $9,000 purchase, with the remainder of the funds to be held as a balance for future use.

GSA recently was criticized when it returned $1 billion to $2 billion in funds Defense had "parked" over several years, forcing the Pentagon to send those funds back to the Treasury unused. It was not clear from McKinney's presentation whether instances with Interior's GovWorks acquisition center that are described in the report will raise similar questions.

McKinney said the Anti-Deficiency Act report would address advance payments by the agency and instances where appropriated funds were used improperly, such as payments from an operations and maintenance fund used to cover military construction costs.

Roger Waldron, acting deputy chief acquisition officer at GSA and a member of the advisory panel, asked whether the four agencies hosting contracting centers would have the opportunity to respond to concerns raised in the reports. McKinney said the reports did not include outside comment, though GSA and others will receive draft copies of them.

He said the Defense inspector general's office had worked hand in hand with inspectors general from other agencies to develop the reports, and those agencies were expected to release corresponding publications. The Interior inspector general's office verified that such a report was expected in August; GSA could not be reached for confirmation.

The Services Acquisition Reform Act Advisory Committee on Thursday also considered findings of a working group on the appropriate role of contractors supporting the government.

Tom Luedtke, working group chairman and NASA's assistant administrator for procurement, presented findings showing that agencies use contractors in a broad range of roles that are not consistent across government or even across individual departments. He said no clear and consistent governmentwide information exists and diverse job descriptions impair the usefulness of the data available.

Panelists agreed not to take on a full debate of the Bush administration's competitive sourcing initiative, noting that could take several years, but instead will focus much of their attention on the various guidelines for ethical conduct that govern federal employees and contractors. Conflict of interest rules, in particular, are strictly applied to government acquisition personnel but generally do not apply to contractors who may be doing the same work, they said.

Panelists noted that some potential contractor conflicts might be easy to avoid, for example, by not allowing a contractor to review work done by others in the same company, but conflicts involving competitors or personal relationships might be more difficult to foresee.

The panel also discussed restrictions on personal services contracts, or contracts involving minute-to-minute oversight of a contractor by a federal employee rather than task-based assignments. Such contracts are generally not allowed, but agencies work around the restrictions because they sometimes need such support to get work done, panelists said.

The panel also discussed the adequacy of procurement regulations, given recent scandals like the Darleen Druyun and David Safavian cases. They generally agreed the statutory framework was sufficient to handle such cases given that there have not been instances in which improper conduct was discovered but could not be prosecuted.