DHS paid millions in SBInet invoices without sufficient details, GAO says

The Homeland Security Department paid $780 million to Boeing Co. for its Security Border Initiative Network (SBInet) but many of the payments lacked sufficient details on what the agency was buying, according to a new report from the Government Accountability Office.

For example, the GAO found some travel costs for the electronic border surveillance system were paid without knowing where, when or for what purpose the travel occurred, and labor cost invoices that did not include hours worked or labor rates.

However, Customs and Border Protection and Boeing said they complied with federal acquisition rules, but the GAO report recommends that the next phase of contracts for border security be handled differently.

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In addition, the SBInet contracts did not meet small business participation goals, Susan Ragland, GAO’s director of financial management and assurance, wrote in the May 26 report.

The agency awarded the contract for the ambitious video surveillance project at the Arizona border in 2008, and the prototype and first phase construction was marked by technical glitches and delays. Secretary Janet Napolitano in January 2011 announced that the next phase of border technology would involve a mix of technologies, including systems similar to SBInet in some areas.

The GAO has issued a number of critical reports on SBInet. In the new report to Congress, the watchdog agency focused on the lack of details in contractor invoices and on small business participation.

Regarding the lack of details, the border protection agency paid the prime contractor $108,000 for two weeks of travel in 2008 without details on where and on what dates the travel occurred, nor what purpose it served, the GAO report said.

In the same two-week period, the agency paid Boeing $1.5 million for costs described as “Direct Labor” without details such as the hours worked and the labor rate category.

Access to supporting details helps the contracting officers assess the proprietary of invoiced costs billed to the government, and allows them to effectively review the invoices, Ragland wrote.

Because those details were not available, the GAO said it was not able to determine whether the 99 invoices it reviewed were fully in compliance with contract provisions. And it claimed agency officials were displeased as well.

“Our review identified numerous instances of CBP contracting officer and contracting officer technical representative frustration when they were unable to obtain detail to support SBInet contractor lump sum invoiced costs, despite repeated requests,” Ragland wrote. “The SBInet prime contractor denied these requests on the basis that CBP’s policies did not require supporting detail. CBP paid the invoiced amounts in all cases.”

Based on its review, the GAO judged the agency’s preventative controls to be “not fully effective,” resulting in an impaired ability to assure that the $780 million paid to Boeing was proper and allowable, in the correct amount and only for the goods and services provided, the report said. The agency relied heavily on close-out auditing to obtain assurance it was paying for appropriate expenses, the GAO said.

In another finding, the GAO reported that the SBInet contractor Boeing met its small business goals in two areas—HUBzone and veteran-owned—and did not meet its overall goal of 40 percent subcontract award dollars going to small businesses. Overall, 33 percent of the SBInet awards went to small businesses.

Boeing said it was unable to meet the goals because of a large steel purchase totaling $242 million for the physical border fence that was required under the Secure Fence Act of 2006. The steel was reported to be only was available from large businesses, which negatively affected Boeing’s ability to meet small business contracting goals.

The following is what GAO reported as the percentage of SBInet subcontract dollars awarded to small businesses, based on a total of $262 million in subcontracts reported as of March 2010:

• Small disadvantaged businesses were awarded 3.77 percent, short of the 5 percent goal.
• Women-owned businesses received 1.7 percent, short of the 5 percent goal.
• HUB-zone businesses received 2.35 percent, exceeding the 1 percent goal.
• Veteran-owned businesses received 4.02 percent, exceeding the 3.5 percent goal.
• Service-disabled veterans received 1.13 percent, short of the 3 percent goal.
• Overall, small businesses received 33.05 percent, which was short of the 40 percent goal.

The GAO recommended five actions, including revising SBInet contracting agreements to require the contractor to provide sufficient detail; revise procedures for contracting officers and contracting officer technical representatives for proper review of invoices; request that closeout audits be performed as quickly as possible; monitor closeout audits; and document lessons learned.

Homeland Security officials raised some concerns about the appropriateness of the first recommendation, while agreeing with it in principle. They either agreed, or agreed in principle, with the remainder of the recommendations.