Skinner: CBP improperly used award-fee approach

Customs and Border Protection paid $8 million in bonus award fees to Chenega Technology Services Corp. from 2003 to 2007 but had little to show for it, according to a new report from Homeland Security Inspector General Richard Skinner.

The fees to the Alaska Native firm were based on a faulty contract structure and did not provide incentives for quality improvement or excellence, Skinner said. CBP used a cost-plus-award-fee contract type that Skinner judged to be the improper type of contract for that type of work.

CBP officials are disputing those findings and maintaining that the contract type was appropriate. Furthermore, they maintained that the award fees were never designed to motivate excellence because other structures were in place for that.

CBP awarded Chenega a 10-year, sole-source contract valued at $475 million to maintain equipment metal detectors, X-ray machines and other technology equipment at border crossings, airports and seaports. The contract also included staffing and a 24-hour operations center. The agency paid $8 million through September 2007 in award fees to Chenega.

The IG began examining the award fees at the request of former Sen. Hillary Rodham Clinton (D-N.Y.). Skinner identified problems in the contract type and said it was developed by agency staff with limited experience and knowledge.

“CBP did not benefit from using the award fee contract type and missed an opportunity to meet or exceed cost, schedule, and performance objectives for enforcement equipment maintenance and field operations,” Skinner wrote.

Cost-plus-award-fee contracts were a prohibited type of contract for fulfilling CBP’s enforcement equipment maintenance and field operations support requirements, Skinner wrote. In addition, CBP did not conduct the required cost-benefit analysis before selecting the contract type.

“We do not know CBP’s rationale for selecting this contract type because the agency could not provide required documentation related to its pre-award decisions, and the individuals who made the decision are no longer with CBP’s contracting office.,” the report states.

The award fees, rather than motivating excellence, merely rewarded compliance, Skinner wrote. CBP paid Chenega between 79 and 94 percent of the available award fees each year.

CBP officials agreed with Skinner that they should have conducted a cost-benefit analysis beforehand, but they further stated that a cost-benefit analysis performed in August 2008 showed the most benefit from retaining the current contractor.

CBP disagreed that the wrong type of contract was selected, and maintained that its office of finance and small business advocate supported the type that was awarded.

Skinner has criticized the same Chenega contract before. In November 2007, the inspector general charged CBP with awarding the contract under the incorrect classification code.