Contracting out of control at FTS regional offices, IG says

The General Services Administration's inspector general today said the Federal Technology Service's client support centers in three regions have breached federal procurement laws over the last two years.

Auditors found FTS employees in regions 4, 6 and 10 were working under ineffective management controls and failing to promote adequate competition.

The final audit report focused on contracting practices in the regions covering 23 states from Alaska to Florida, including the Bremerton, Wash., office, which GSA officials shut down when the allegations surfaced last August. The IG released a draft audit report in August detailing many of the same problems in Region 10, which includes Alaska, Idaho, Oregon and Washington.

"The audit identified numerous improper task orders, such as misuse of small business contracts, and ordering work outside the contract scope and outside the scope of the Information Technology Fund," said John Langeland, GSA IG audit manager for Region 5, which includes Illinois, Indiana, Michigan, Ohio, Wisconsin and Minnesota. "The contracting practices did not provide reasonable assurance that the government received supplies and services at a fair and reasonable price."

GSA officials called the IG's findings troubling and vowed to correct all the problems.

"We see the audit as an opportunity to correct underlying contracting weaknesses," FTS commissioner Sandra Bates said. "I'm confident our new procedures ensure FTS contracting will be done properly from now on."

Since the IG released the draft report in August, Bates said, FTS has required employees to take additional training courses in procurement law, reorganized the client support offices to work more like a team and initiated a legal review of all procurement practices. GSA also has established a set of internal controls with acquisition checklists and procurement management reviews for every region.

GSA administrator Stephen Perry has asked the IG to look at the remaining FTS client support centers in eight regions to make sure this is not a widespread or continuing problem, Bates said.

Examiners said FTS employees did not adhere to proper procurement procedures in accommodating customer preferences, such as buying floating marine barriers and office building construction services. FTS' mandate is only to buy hardware, software and related IT services.

"In making several of these awards, millions of dollars were wasted by compensating the contractors for doing little more than placing orders with other favored contractors to do the actual work," the IG report said. "Competition, or otherwise permitting vendors a fair opportunity to be considered, was absent from many of the transactions examined."

GSA deputy administrator Davis Bibb said the employees did not go outside the usual contracting practices merely to earn higher bonuses. Bonuses are based on sales volume.

"It is clear we did not have sufficient management oversight," Bibb said. He attributed the practices to "a lack of understanding of the rules by associates in some cases, and in other cases the associates sacrificed procurement rules to satisfy their customers."

Bibb said GSA is taking disciplinary action against the employees involved, but he would not comment on specific measures. He added he was not aware of GSA filing any criminal charges.

Bates said FTS will review the past performance, capabilities and overall qualifications of all the companies mentioned in the IG report.

In addition, she said, two companies will review FTS policies and procedures. Gartner Inc. of Stamford, Conn., will issue a report by Feb. 1 about GSA's efforts to solve the problems the IG identified. Acquisition Solutions Inc. of Chantilly, Va., will review FTS' organizational structure, including the number of contracting officers and client representatives, the number of support staff and whether training is sufficient. Acquisition Solutions will examine FTS at national and regional levels and will complete its report by May, Bates said.

"We are focused in turning this thing around," Bibb said. "This is not business as usual. We have been working and will continue to correct the issues in the report."

(Click to download PDF of the report, 61 pages)

Jason Miller writes for Government Computer News magazine.