Interior reconsiders future of assisted services branch

Interior Department officials have asked management consultants for advice on whether to close one of Interior's assisted acquisition services offices, a department spokesman said Aug. 16.

Officials made the request after an inspector general’s report released in July said Interior’s Acquisition Services Directorate (AQD) in Sierra Vista, Ariz., posed more risks than benefits for the department. The IG didn’t go as far as recommending that officials close the shop, but they did question its worth.

“We recommend that [Interior officials] carefully consider whether retaining AQD-Sierra Vista as an interagency contracting office is in the best interest” of the department, wrote Mary Kendall, acting IG, in the report.

The spokesman said officials will make a decision about AQD-Sierra Vista after getting the consultants’ advice.

Related stories:

Interior hopes to save $500 million through IT transformation

EPA, Interior face budget cuts as proposals move out of committee

However, if officials choose not to close the Sierra Vista directorate, Kendall said they should consider changing its funding structure so it can make a profit for the department.

AQD-Sierra Vista buys goods and services on behalf of Interior and other federal agencies, including the Defense Department. In fiscal 2009, AQD-Sierra Vista issued 597 contract orders totaling $438.3 million. Last year, it issued 640 orders, worth a total of $498.7 million.

AQD-Sierra Vista is structured so that it can only recover its costs from the agencies that use its services; it cannot make a profit. The AQD in Herndon, Va., is set up so it can make a profit.

On the management side, the IG's report states that officials at AQD-Sierra Vista do not monitor subcontracts and fail to check prices as required. Furthermore, the agency accepts requests for purchases and payments too close to the end of the fiscal year.

“This practice puts AQD-Sierra Vista at risk of issuing contracts improperly, of potentially violating the bona fide needs rule and of expending expired funds,” Kendall wrote in the report.

The report recommends a cutoff date for taking orders and urges AQD-Sierra Vista’s acquisition officials to monitor subcontracts more closely, including those awarded to small businesses.

Interagency contracting has been on the Government Accountability Office’s list of programs at high risk for waste, fraud, abuse or mismanagement for several years and has continued to be placed near the top of that list. GAO labeled interagency contracting as a high-risk area beginning in 2005, due in part to the need for stronger internal controls and clear definitions of roles and responsibilities. GAO auditors have found problems in acquisition planning, the proper use of funds and contract administration, which are similar to the problems that Interior's IG recently found.

This isn't the first time Interior has had trouble with its assisted acquisition services.

The department's interagency contracting operations at its National Business Center ran into problems several years ago when officials mishandled DOD’s money. In addition, AQD-Sierra Vista has been the subject of multiple audits by the IG offices at Interior, DOD and GAO, all of which uncovered a history of problems, the report states.