WJ
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
SEP 2 9 1998
OFFICE OF
THE INSPECTOR GENERAL
MEMORANDUM
C
SUBJECT:
FROM:
TO:
Report of Audit No. E1BMF7-23-0012-8100251
Review of Personal Services
Elissa R.
Deputy Assistant Inspector Genera
for External Audits
Alvin M. Pesachowitz
Acting Assistant Administrator for
Administration and Resources Management
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A copy of the subject final report is attached. This report contains findings that describe the
results of our review of personal services under EPA contracts. We hope that the results of our
review will be useful to you as you continue to work to assure personal services relationships
between EPA personnel and contractors are avoided.
This report represents the opinion of the Office of Inspector General. Final determinations on
matters in this report will be made by EPA managers in accordance with established EPA audit
resolution procedures. Accordingly, the findings described in this audit report do not necessarily
represent the final EPA position. We have no objection to the release of this report to the public.
Your response to our draft report is included as appendix 1. Based on the Office of
Administration and Resources Management's response and discussions with our staff, we made
appropriate changes to this final report.
ACTION REQUIRED
In response to the draft report, you provided responsive action plans and milestone dates for
correcting our findings. As a result, and in accordance with EPA Order 2750, we find your
response to the report acceptable. Therefore, we are closing this report in our tracking system as
Recycled/Recyclable • Printed with Vegetable Oil Based Inks on 100% Recycled Paper (40% Postconsumer)
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of this date. Please track all planned actions and milestone dates in the Management Audit
Tracking System. Should you or your staff have any questions regarding this report, please
contact Leah Nikaidoh, Audit Manager, Northern Audit Division at (513) 487-2365.
Attachment
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Audit of Personal Services
EXECUTIVE SUMMARY
PURPOSE
RESULTS IN BRIEF
In 1997, we reviewed EPA's progress since 1992 in addressing
contracts management deficiencies identified by the Agency's
Standing Committee on Contracts Management (Standing
Committee). One of the seven problem areas identified by the
Standing Committee was personal services. During our 1997
review, 38 percent of the contracts we reviewed for personal
services showed indications of such relationships between EPA
and contractors. EPA personnel were co-located with contractors
on all of these contracts, and indications of personal services
relationships occurred throughout the Agency's programs.
The objectives of this audit were to determine: (1) the extent EPA
contracts included personal services relationships, and (2) the
adequacy of the Agency's controls to prevent personal services
contracts.
We found specific instances of personal services problems, or the
appearance of such, in over half of the contracts reviewed, and
among nearly all of the major program offices. In several
instances, the agency has taken action to correct the problems. We
also found indicators of personal services in two additional
contracts (see exhibit 1). Because of the number and distribution
of such instances across the Agency, the potential exists that
personal services is a continuing systemic problem. On-site
contracts are especially vulnerable to personal services situations
because of the potential for daily face-to-face interaction between
EPA staff and contractors. Program offices and contracting
divisions each must share the role of ensuring that personal
services do not occur. Program offices, with the help of '
contracting offices, should attempt to eliminate unnecessary
interactions with contractors, including shifting work off-site if
possible.
Instances of personal services, or the appearance of such, occurred
in 13 of 23 (56 percent) contracts, primarily because: (1) EPA
program office employees exercised excessive supervision of
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Audit of Personal Services
contractor and subcontractor staff, (2) close working arrangements
existed, or (3) contract language and oversight needed
improvement (see chapter 2). EPA improperly treated contractor
staff as Government employees. Normally, the Government
directly hires its employees under competitive appointment or
other procedures mandated by civil service laws. Obtaining
personal services by contract, rather than by direct hire,
circumvents those laws and Office of Management and Budget
personnel ceilings. Also, in some cases, contractors performed
work outside the scope of their contracts.
The Agency's controls generally seemed adequate. However, EPA
personnel were not always committed to following the controls,
resulting in the above instances of personal services. Assigning
knowledgeable and committed project officers to monitor contracts
and awarding fixed-priced contracts, in some cases, significantly
reduced the risk of personal services.
RECOMMENDATIONS
We recommend that the Acting Administrator for Administration
and Resources Management and the Agency Senior Resource
Officials:
1. Identify all contracts where EPA and contractors are co-
located, and evaluate and document whether any on-site
contracts can be moved off-site.
We recommend that the Acting Administrator for Administration
and Resources Management:
2. Direct contracting divisions to incorporate a contract clause
similar to the one used by the Cincinnati Contracts
Management Division ("Government Contractor
Relations") in all EPA contracts.
3. Direct Agency contracting officers to conduct a site visit at
least annually for all on-site contracts and document
whether personal services deficiencies were identified. If
deficiencies are identified, the contracting officer should
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AGENCY COMMENTS
OIG EVALUATION
provide needed guidance or recommendations to the project
officer.
The Acting Assistant Administrator for Administration and
Resources Management provided a written response to our draft
report on September 4,1998. The Acting Assistant Administrator
agreed with all recommendations in this report.
The Acting Assistant Administrator plans to: (1) coordinate with
EPA program offices to complete a review and analysis, within 90
days of this report's issuance, determining whether contractors
working at EPA locations can be moved off-site; (2) develop an
Agency-wide contract clause to clarify allowable Government/
Contractor Relations; and (3) modify EPA's Acquisition
Regulation to include the requirement to use this Agency-wide
clause. Modification of EPA's Acquisition Regulation is to be
completed by February 1999. Contracting officers will also
perform site visits for all on-site contracts, and contracting officers
will discuss personal services issues with project officers for such
contracts on an annual basis. The Office of Acquisition
Management plans to issue a memo to contracting officers
informing them of this requirement by December 1998.
We have included a summary of the Acting Assistant
Administrator's comments in appropriate sections of this report.
His entire response is included as appendix 1 to this report
The actions described above, when completed, and the actions
taken to date, will adequately address the findings and
recommendations in this report.
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Table of Contents
EXECUTIVE SUMMARY i
ABBREVIATIONS vi
CHAPTERS
1 INTRODUCTION 1
Purpose 1
Background 2
Scope And Methodology 5
Prior Audit Coverage 6
2 INSTANCES OR APPEARANCE OF PERSONAL SERVICES
UNDER CONTRACTS 7
EPA Employees Exercised Excessive Supervision 8
Close Working Relationships Existed 12
Contract Language and Oversight Needed Improvement 14
Two Contracts Were Managed Well to Prevent Personal Services 18
Conclusion 19
Recommendations 20
Agency Comments 20
OIG Evaluation 21
EXHIBITS
' 1 Results of Review 22
2 Personal Services Issues 23
APPENDICES
1 ' Office of Administration and Resources Management Response 25
2 Distribution 31
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Abbreviations
CMD-RTP Contracts Management Division-Research Triangle Park
DOPO Delivery Order Project Officer
EPA Environmental Protection Agency
FAR Federal Acquisition Regulation
OAR Office of Air and Radiation
O ARM Office of Administration and Resources Management
OPPTS Office of Prevention, Pesticides, and Toxic Substances
ORD Office of Research and Development
OSWER Office of Solid Waste and Emergency Response
OW Office of Water
RTP Research Triangle Park
WED Western Ecology Division
VI
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CHAPTER 1
Introduction
PURPOSE
In 1992, EPA first declared contracts management as a
Presidential-level weakness under the Federal Managers' Financial
Integrity Act. In June 1992, EPA's Standing Committee on
Contracts Management (Standing Committee)—now called the
Resource Management Committee-made 40 recommendations to
correct longstanding weaknesses in contracts management. The
Standing Committee's report identified seven problem areas, one
of which was that personal services were improperly occurring
under EPA contracts.
Since 1992, EPA has taken positive steps to address contracts
management deficiencies. However, in our review of the Agency's
Contract Management Initiatives (EPA Report 7400070, dated
September 30,1997), we recommended that the Acting Assistant
Administrator for Administration and Resources Management
continue to include contracts management as an Agency-level
weakness for fiscal 1997. We made that recommendation because
we found continued indications of potential vulnerabilities.in three
of the seven areas, including personal services. Specific indicators
of personal services we found included:
• 38 percent (5 of 13) of the contracts we reviewed for
personal services had indications of such relationships;
• All 5 of those contracts had some type of on-site/co-
location arrangements between EPA and contractor staff;
and,
• Indications of personal services relationships occurred
throughout the Agency (in the regions, the Offices of
Administration & Resources Management, Research &
Development, and Policy Planning & Evaluation).
Personal services relationships can have several undesired effects.
First, if unauthorized Agency personnel direct contractor staff, the
contractor might perform work outside the scope of the contract,
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creating legal problems. Second, close relationships between EPA
and contractor personnel could give that contractor an advantage
during future contract awards and decrease the chance other
offerprs have of receiving contracts. Third, normally the
Government directly hires its employees under competitive
appointment or other procedures mandated by civil service laws.
Obtaining personal services by contract, rather than by direct hire,
circumvents those laws and Office of Management and Budget
personnel ceilings. Finally, personal services relationships—which
blur the roles of Government personnel and contractor staff-could
cause the public to seriously question whether the Government is
truly protecting the public's interests.
The objectives of this audit were to determine: (1) the extent EPA
contracts include personal services relationships, and (2) the
adequacy of the Agency's controls to prevent personal services
contracts.
BACKGROUND The Federal Acquisition Regulation (FAR) Part 37 on service
contracting discusses personal services contracts. A personal
services contract, by its written terms or as administered, makes the
contractor staff appear to be Government employees. Such
contracts are characterized by an employer-employee relationship
between Government and contractor personnel. The key indicator
of personal services is when contractor personnel are subjected to
continuous supervision and control of a Government employee(s).
According to FAR 37.104(b), agencies are not permitted to award
personal services contracts, unless specifically authorized by
statute.
FAR 37.104 lists the following descriptive elements to be used as a
guide in assessing whether a proposed contract is "personal" in
nature and an improper contract relationship might exist:
(1) Contractor performance of services is done on a
Government site;
(2) The Government furnishes principal tools and equipment to
the contractor to execute the contract;
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(3) Services are applied directly to the integral effort of the
agency in furthering its function or mission;
(4) Comparable services, meeting comparable needs, are
performed in the same agency or similar agencies using
civil service personnel;
(5) The need for the contractor-provided service can reasonably
be expected to last beyond one year; and,
(6) The inherent nature of the service, or manner in which it is
provided, reasonably requires, directly or indirectly,
Government direction or supervision of contractor
employees in order to (a) adequately protect the
Government's interest, (b) retain control of the function
involved, or (c) retain full personal responsibility for the
function supported in a duly authorized Federal employee.
EPA Order 1900.1 A, Use of Contractor Services to Avoid
Improper ContractorLRelationships (the Order), issued in April
1994, provides guidance related to avoiding improper contractor
relationships. The Order addresses five areas: (1) interaction with
contractor personnel, (2) identification of contractor personnel, (3)
contractor attendance at EPA functions and meetings, (4)
contractor employee conduct, and (5) physical space concerns.
The Order states that EPA employees, other than the Project
Officer, Work Assignment Manager, or Contracting Officer, may
not assign tasks to a contractor unless they have specific authority
to do so. Technical direction must be issued in writing from the
Project Officer (or authorized designee) to the contractor's point of
contact. Oral technical direction must be put hi writing within five
calendar days.
According to the Order, "at all times, it shall be readily apparent
which organization employs an individual." Contractor personnel
should wear appropriate badges identifying them as such.
Contractors should also identify themselves and their employer in
all points of contact, including during meetings, and on Agency
voicemails and e-mails. Contractor personnel should never attend
meetings as the official representative of an EPA organization.
Agency employees also shall not permit contractors to attend EPA
functions, including holiday parties, unless documented as required
for contract performance. To the extent possible, EPA staff shall
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be physically located in separate areas from contractor personnel,
and contractors' areas should be identified as such. In cases where
both EPA and contractor staff must occupy or use a general area,
there must be physical separation and identification of space.
The Order also lists examples of prohibited personal services, such
as:
(1) EPA employee routinely gives instructions and directions
directly to contractor staff.
(2) EPA employee recommends, or refuses to have, specific
contractor staff assigned to work.
(3) EPA employee sits in an interview for potential contractor
hirees and suggests who to hire.
(4) EPA employee invites contractors to attend EPA meetings
not related to the contract work.
(5) EPA employee enters a contractor's work area when no
contractor supervisor is present.
(6) EPA employee directly requests contractor personnel to
prepare a special report (not otherwise required by the
contract) from a database the contractor maintains.
The General Services Administration states that the following
factors also tend to characterize services as personal services:
(1) Government can obtain civil service employees to do the
job.
(2) Government assigns tasks to, and prepares work schedules
for, contractor employees.
(3) Government reserves the right to control the number of
people employed and the duties of individual contractor
employees.
(4) Contractor staff are used interchangeably with Government
staff to perform the same functions.
(5) Contractor personnel are integrated into the Government's
organizational structure.
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SCOPE AND
METHODOLOGY
We reviewed 23 contracts for personal services issues (see exhibit
1).
We discussed our proposed sampling methodology with Agency
officials in October 1997. We agreed that we would focus our
review on higher-risk, on-site contracts (that is, contractor staff and
EPA employees were co-located), and that we would cover
contracts from all major program offices. In October 1997,
Agency contracting officials in Headquarters, RTF, Cincinnati, and
the regions provided the Office of Inspector General with lists of
the on-site contracts they managed that were active as of fiscal year
(FY) 1996. These lists totaled 165 contracts.1 We reduced the
universe of 165 to 84 contracts by removing all contracts: (1) with
a low risk for personal services (janitorial, mail room, guard
services, etc.); (2) which expired on or before September 30,1997,
and did not have a follow-on contract with the same contractor; or,
(3) that were recently awarded and were not follow-on contracts.
We then selected 23 contracts from the list of 84; twelve of which
were randomly selected. Of the remaining 11, we selected 7
contracts because of the large dollar value ($50 million or more),
and 4 others because we were asked to review the contract.
For each contract, we reviewed contract file documentation,
including Statements of Work, work assignments or delivery
orders where applicable, technical directives, and contractors'
monthly progress reports. We interviewed the contracting officer,
the project officer, work assignment managers or delivery order
project officers, and contractor staff. We also conducted site visits
to EPA space occupied by contractors to observe whether offices
were properly marked and contractor staff appropriately identified.
We visited EPA offices in Washington, D.C.; RTF, NC;
Cincinnati, OH; Edison, NJ; Philadelphia, PA; Dallas, TX; and '
Ada, OK.
*To maintain our independence, we excluded from our universe any contracts where the Project Officer
was an Office of Inspector General employee.
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We performed our audit in accordance with the 1994 Government
Auditing Standards issued by the Comptroller General. We
conducted fieldwork from October 1997 to May 1998.
PRIOR AUDIT The Office of Inspector General issued a report on September 30,
COVERAGE 1997, which addressed EPA's efforts since 1992 to correct
longstanding weaknesses in contracts management (EPA Report
No. 7400070). We found that although the Agency had taken
positive steps to address contracts management weaknesses,
potential vulnerabilities still remained in three areas, including
personal services.
This specific audit of personal services was conducted as a result
of our prior findings in Report No. 7400070.
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CHAPTER 2
Instances or Appearance of Personal Services
Under Contracts
Instances of personal services, or the appearance of such, occurred
in 13 (56 percent) of 23 contracts (see exhibit 1), primarily because:
(1) EPA program office employees exercised excessive supervision
of contractor and subcontractor staff, (2) close working
arrangements existed, or (3) contract language and oversight needed
improvement. As a result, EPA treated contractor staff as
Government employees and appeared to circumvent personnel
ceilings. According to the Federal Acquisition Regulation
37.104(b), "Agencies are not permitted to award personal service
contracts, unless specifically authorized by statute." None of the
contracts reviewed were authorized as personal service contracts.
(See exhibit 2 for a list of all personal services issues by contract.)
We also found indicators of personal services in two additional
contracts.
The Agency's controls generally seemed adequate to prevent
personal services. However, EPA personnel were not always
committed to following the controls, resulting in the instances or
appearance of personal services we identified. As evidenced in two
contracts we reviewed—one ORD and one OW contract—assigning
knowledgeable and committed project officers to monitor contracts
and awarding fixed-priced contracts can significantly reduce the risk
of personal services.
This report covers all instances of activities we found that were
contrary to personal services policies and regulations. Some
contracts exhibited more instances of personal services than others,
or more prevalent weaknesses. However, all the'se identified
instances, whether isolated or widespread, are worthy of
management attention and correction. We found instances of
personal services problems, or the appearance of such, in over half
of the contracts reviewed, and among nearly all of the major
program offices. Although program offices may view these cases as
isolated, the number and distribution of such instances across the
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Agency increases the potential that personal services is a continuing
systemic problem.
EPA EMPLOYEES
EXERCISED
EXCESSIVE
SUPERVISION
Unauthorized EPA
Employees Directed
Contractor Staff
EPA employees exercised excessive control and supervision over
contractor and subcontractor staff on 13 of the 23 (56 percent)
contracts in the following ways2:
(1) Unauthorized EPA employees directed contractor staff.
(2) Project Officers/Work Assignment Managers directed
contractor staff.
(3) EPA employees interacted with and directed subcontractors.
(4) EPA staff recommended specific personnel be hired or
staffed on projects.
Unauthorized EPA employees directed contractor staff to perform
tasks without the Project Officer's knowledge and/or written
authorization on four contracts. According to EPA Order 1900.1 A,
only the EPA Contracting Officer, Project Officer or authorized
designee may communicate with the contractor. On all four
contracts (68C60074, ORD; 68C60082, ORD; 68W50008, OPPTS;
and 68C30330, OW), EPA employees directly contacted the
contractor and requested work to be done. For example, on contract
68W50008, an EPA employee worked with the contractor to
complete data requests. The employee stated that he was authorized
to direct the contractor because he was an "unofficial" Work
Assignment Manager. In all four cases, the contractors performed
the requested tasks, and the EPA employees did not have the
authority to direct the contractor. Without specific designation from
the Project Officer and approved by the Contracting Official via an
EPA Form 1900-65, Nomination and Appointment of Contracting
Officer's Representatives, an EPA employee may not direct a
contractor to perform any tasks. Unauthorized work requests could,
and did, result in the contractor performing work outside the soope
of the contract.
ORD took corrective actions on its two contracts. On contract
68C60074, an ORD Extramural Management Specialist and the
We found more than one of these four issues on some contracts.
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Project Officer advised the contractor's Project Manager to direct
his staff not to perform work for EPA unless work requests are
approved by the Project Officer or Work Assignment Manager. On
contract 68C60082, the Project Officer held several training
sessions with EPA personnel to ensure that they were aware of the
proper way to interact with contractors. The Project Officer also
instructed the contractor to provide her with the names of any EPA
staff who directly request work to be done.
Project Officers/Work
Assignment Managers
Directed Contractor Staff
EPA Project Officers/Work Assignment Managers directed
contractor staff, and did not always provide technical direction in
writing, on four contracts. EPA Order 1900.1A states that
technical direction should be provided, in writing, to the
contractor's point of contact and, if the direction is given orally,
technical direction should be put in writing within 5 calendar days.
In two cases (68D60059, OAR; and 68C50008, ORD), the Project
Officers provided oral instructions on a regular basis. In both of
these cases, the contractor's Program Managers were not located
on-site at an EPA facility. AH work direction from the EPA must
go through the contractor's Program Manager before the work can
be started (Work Assignment) or clarified (Technical Direction).
Lack of an on-site Program Manager increases the risk that EPA
employees will interact and communicate directly with the
contractor staff, thus creating personal services. ORD informed us
that they are taking action to correct problems identified on contract
68C50008. An ORD Extramural Management Specialist stated that
ORD is planning to consolidate this contract into another on-site
contract where additional structural and administrative oversight
and controls should preclude the personal services vulnerabilities
identified.
On another contract (68D30024, ORD), the Project Officer
provided technical direction to the contractor via telephone calls.
He stated that the information provided was simply clarification and
did not need to be put in writing. The contractor's Project Manager
documented the information in memos to his files. Also, the Project
Manager stated that he occasionally went to lunch/dinner with the
Project Officer and discussed additional services his company could
provide under the contract. The Contracting Officer stated that the
telephone call information constituted technical direction and the
Project Officer should have put such direction in writing. The
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Contracting Officer instructed the Project Officer to document
future phone calls in writing, and the Project Officer agreed to do
so. The Contracting Officer also informed the Project Officer that it
is the responsibility of the EPA, not the contractor, to define the
Government's requirements.
On the fourth contract (68C30330, OW), we found the appearance
of a personal services contract. We issued a separate report on this
contract to the Office of Water (EPA Report No. 8100092).
EPA Employees
Interacted with and
Directed Subcontractors
EPA employees interacted with and directed subcontractors on four
contracts. According to FAR Part 42.505, "Government
representatives must recognize the lack of privity of contract
between the Government and subcontractors." In essence, the
Government has no contractual relationship with subcontractors.
EPA employees are not permitted to provide direction to
subcontractor employees.
In two cases (68W10055, OARM; and 68S53002, Region 3), EPA
Project Officers and Work Assignment Managers interacted and
directed subcontractors because the contract was designed to permit
"dedicated team subcontracting." This concept involves a closer
working relationship between the contractor and subcontractor than
is typical. Under these conditions, the subcontractor employees act
as, and are assigned to the contract as, employees of the prime
contractor. One of the contracts also had a subcontractor employee
designated as the Program Manager—typically EPA's main point of
contact for contractor communications.
In the other two cases (68W40010, Region 3; and 68W40016,
Region 6), unauthorized EPA employees requested subcontractor
staff to perform various tasks. In all cases, according to EPA Order
1900.1 A, EPA Project Officers and Work Assignment Managers
should communicate only with the prime contractor's point of
contact.
Region 3 has taken corrective actions for contract 68W40010.
Region 3 officials stated that they issued a memorandum
underscoring the importance of avoiding personal services. In
addition, they sent a message to Region 3 Project Officers and Work
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EPA Staff Recommended
Specific Personnel be
Hired or Staffed on
Projects
Assignment Managers, reminding them that they should only
interact and have discussions with the prime contractor.
Region 6 has taken corrective actions for contract 68W40016.
Region 6 officials stated that they and the contractor instituted
procedures that should ensure that EPA personnel deal only with the
prime contractor's Program Manager. Also, the Contracting Officer
and Project Officer started performing contract monitoring checks
during which they inspect work spaces for compliance with
contracting regulations.
EPA employees recommended that specific contractor personnel
be hired or staffed on projects, on three contracts. In one case
'(68C40045, OARM), an EPA Project Officer provided input to a
follow-on contractor regarding which applicants should be hired.
According to the Contracting Officer, the contractor's owner stated
that he planned to contact the EPA Project Officer to decide which
employees should be hired. The Contracting Officer informed him
that he should not talk to the Project Officer or any other EPA
employee about staffing. Another representative from the
contractor said that it was normal for them to contact the Agency's
Project Officer and ask who should be hired. The Project Officer
met personally with the owner and gave him a list of the prior
contractor's employees and discussed the list with the incoming
contractor two weeks before the award and re-hiring of staff. The
new contractor did not contact representatives of the former
contractor to ask who their best employees were, which would be
common practice. The Cincinnati OARM Security and Safety
official stated that the OARM Senior Resource Official has
arranged for formal remedial training for all OARM Project
Officers, Work Assignment Managers, and Delivery Order Project
Officers on personal services issues.
Under a second OARM contract (68Wl0005, OARM), the
contractor's Technical Project Leader indicated that EPA's DOPO
sometimes asked for specific contractor staff to be placed on certain
tasks.
In another case (68W40010, Region 3), an EPA Work Assignment
Manager directed the contractor to use a certain subcontractor
employee for a work assignment. A contractor representative stated
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Washington DC 20460
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that the Work Assignment Manager liked the work of a particular
subcontract employee, and believed he was valuable to the
assignment. The Work Assignment Manager directed the contractor
to use that employee, and the contractor personnel did not believe
they could refuse.
CLOSE WORKING
RELATIONSHIPS
EXISTED
Close working relationships existed on three contracts which lead
to personal services. If not properly monitored and supervised,
close working environments make contracts vulnerable to personal
services.
Under one ORD contract (68C40002, ORD), problems occurred
with technical direction to contractors and with property
management.3 These problems resulted from a "one workforce"
environment-that is, EPA staff and contractors appearing to be one
organization~at ORD's Western Ecology Division (WED). Forty-
two percent of the total on-site staff at Newport worked for various
contractors; 17 percent of the total staff were contractors under
contract 68C40002. ORD reported in its May 1998 Management
Review that some task directives were improperly issued to add or
delete deliverables, change deliverable due dates, and add or delete
tasks. These task directives were beyond the scope of the technical
direction clause in the contract and were not authorized by the
Contracting Officer. As a result, such actions demonstrated an
uncontrolled and improper personal services relationship between
EPA and the contractor. Technical direction may not be used to
change any of the express terms and conditions of work
assignments, including adding work, changing work that has been
ordered, changing the period of performance, or altering the cost of
the work. ORD's WED, working with the Contracts Management
Division in RTP (CMD-RTP), took corrective actions to ensure that
work is assigned properly under the contract. For example, WED
instructed its Branch Chiefs, Project Officers, and Work
Assignment Managers to issue work assignment amendments when
changes are made to previously assigned work.
3We did not review this contract but instead, with ORD's concurrence, relied on the results from ORD's
May 1998 Management Review report of ORD's Western Ecology Division in Corvallis and Newport, OR.
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ORD also reported weaknesses with property management under
contract 68C40002. In general, ORD often informally provided
property to the contractor, and the contractor did not record, track,
or report the property. ORD routinely provided personal computers
and a hovercraft to the contractor prior to the Contracting Officer's
authorization. Further, the hovercraft was purchased as a new
acquisition specifically for the contractor's use, which is improper.
EPA Procurement Policy Notice 96-03 prohibits the acquisition of
property with the intent to provide it to a contractor for use. The
contractor stated that its staff used all of the lab equipment
exclusively, too. The contractor also routinely acquired small
equipment items (cameras, binoculars, power drills, etc.) without
the Contracting Officer's authorization, which was a breach of a
specific contract clause. Finally, the contract did not reflect all
property held by the contractor, and the contractor was not fulfilling
its obligation of recording and tracking the property. ORD also
inappropriately assisted the contractor in managing contractor-held
property, and assigned property to specific contractor employees.
WED is currently working with CMD-RTP to provide training to
WED employees on appropriate property management procedures.
Under the other two contracts (68Wl0055, OARM; and 68W40016,
Region 6), EPA employees occupied, and worked out of, space at
the contractor's or subcontractor's own off-site offices. The
Statement of Work for contract 68 Wl 0055 required the contractor
to provide an office facility to house the contractor, subcontractor,
and EPA employees. Personal services issues identified on this
contract included: EPA employees recommended that specific
contractor personnel be staffed on projects, and EPA employees
dealt directly with subcontractors. Close physical working
relationships allowed EPA personnel to interact with contractor and
subcontractor staff on a regular basis and facilitated the personal
services issues.
The General Counsel, in an opinion dated December 18,1996,
stated that an agency may direct a contractor to acquire leased
space, provided that the acquisition is "incident" (necessary) to
contract performance within the contract scope, and not intended to
acquire space for the Government's use. According to a key Office
of Information Resources Management official, EPA program office
13
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Audit of Personal Services
CONTRACT
LANGUAGE
AND OVERSIGHT
NEEDED
IMPROVEMENT
Statements of Work
Contained Language
Allowing Personal
Services
personnel did not need to be co-located with contractor or
subcontractor staff.
A former Contracting Officer expressed concerns about why EPA
was requiring the contractor to lease office space for subcontractors,
and EPA staff. An Office of Acquisition Management Service
Center Manager expressed the same concern and revised the
Statement of Work for the follow-on contract to be awarded in
fiscal 1999. The EPA-imposed leased space requirement was
omitted in the draft Statement of Work dated February 1998.
Personal services, or the appearance of such, occurred, in part,
because Statements of Work contained language allowing
personal services. Contracting offices also generally did not
conduct on-site reviews to determine if internal controls were in
place and implemented to prevent personal services.
Personal services, or the appearance of such, occurred in 4 of the
23 (17 percent) cases because Statement of Work language allowed
such activities. The Office of Acquisition Management and its
contracting divisions are responsible for ensuring that Statements of
Work are free of personal services language and tasks.
On one contract (68W10055, OARM), the Statement of Work
contained several instances of language indicating a potential for
personal services. Most notably, the contractor was tasked with
being the "institutional memory" for EPA's information systems
and programs. The Statement of Work also required the contractor
to provide office space to house not only the contractor and
subcontractor staff, but also EPA staff. There is also language
indicating that the Contracting Officer. Project Officer, Delivery
Order Project Officer, or EPA Technical Manager had the ability to
demand removal of contractor personnel when these EPA staff
deemed the continued assignment of these personnel were in
conflict with the Government's interest. According to EPA Order
1900.1 A, EPA officials are prohibited from intervening in the hiring
or firing of contractor staff.
14
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Audit of Personal Services
The Office of Acquisition Management intends to award a follow-
on contract in December 1998. It has revised the Statement of
Work for the upcoming contract and eliminated all language
requiring coordination between the contractor and anyone other than
appropriate EPA officials. The Office of Acquisition Management
has also deleted the requirement that the contractor provide
permanent office space for EPA staff.
In another contract Statement of Work (68C60082, ORD), EPA
required that, "All contractor employees shall sign in and out each
day with the contractor's Project Manager." According to EPA
Order 1900.1 A, "A personal services contract is a contract which,
by its terms or as administered, results in contractor personnel being
subject to relatively continuous supervision and direct control by a
Government official or employee." The language in this Statement
of Work indicates an unnecessary level of supervision on EPA's
part. The Project Officer stated that she liked the requirement
because she wanted to see the attendance information to make sure
the contractor is working the appropriate hours for the hotlines it
supports. Under this fixed-price contract, there is no need for EPA
to require the contractor staff to sign in and out. The contractor's
Program Manager is responsible for the hours her staff works, not
EPA. The Contracting Officer also agreed that this language should
not be in the Statement of Work4.
Another contract (68C40045, OARM) Statement of Work said that:
The security personnel excluding the on-site contract
supervisor are required to use a time clock provided
by EPA. It is also the responsibility of the security
personnel to monitor the use of the time clock by
other on-site contractor employees to assure that the
proper procedures are followed and that individuals
only punch their own cards.
Having the guards monitor other contractors is inappropriate, and
outside the scope of a contractor's responsibility. The contract
4The Contracting Officer recently inherited responsibility for the contract due to a reorganization and was
not responsible when the contract was awarded.
U.S. EPA Headquarters Library, c
Mail code 3201
1200 Pennsylvania Avenue NW
Washington DC 20460
Report No. E1BMF7-23-0012- 8100251
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Audit of Personal Services
specifically stated that the contractor should not be placed in a
position of command, supervision, administration or control over
personnel of other contractors.
According to the Project Officer, the contractor did monitor the time
clock usage by other contractors. He said that the language was put
into the Statement of Work by a former manager who wanted
certain contractor's time charging monitored. The Project Officer
stated that the contractor is no longer performing this task under the
follow-on contract. However, the Statement of Work for the
follow-on contract awarded in September 1997 contained the same
language. The Project Officer stated that he would coordinate with
the Contracting Officer to issue a modification to remove that
language from the new contract. The Contracting Officer agreed
that the language should be removed.
Cincinnati Contracts
Division Incorporated
Contract Clause Into
All On-Site Contracts
On a positive note, the Cincinnati Contracts Management Division
routinely incorporated a specific clause ("Government Contractor
Relations") into the on-site contracts it awarded. This clause
delineates proper interactions between EPA and contractor
employees. The RTP and Headquarters contracting divisions did
not use a similar clause in their on-site contracts. The clause states:
(a) The Government and the Contractor understand
and agree that the services to be delivered under this
contract by the Contractor to the Government are
non-personal services and the parties recognize and
agree that no employer-employee relationship exists
or will exist under the contract between the
Government and the Contractor's employees. It is
therefore in the best interest of the Government to
afford both parties a full and complete understanding
of their respective obligations.
,(b) Contractor personnel under this contract shall
not:
(1) Be placed in a position where they are
under the supervision, direction, or
evaluation of a Government employee.
16
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Audit of Personal Services
Contracting Officers
Generally Did Not
Conduct On-Site
Reviews
(2) Be placed in a position of command,
supervision, administration or control over
Government personnel, or personnel of other
contractors, or become a part of the
Government organization.
(3) Be used in administration or supervision
of Government procurement activities.
Contracting Officers did not conduct on-site reviews for 16 of 21
(76 percent) contracts.5 We found personal services issues, or the
appearance of such, on 10 of the 16 (63 percent) contracts.
Without conducting reviews of on-site contracts, Contracting
Officers have limited assurance that personal services are being
avoided. In general, Contracting Officers acknowledged that they
should visit the sites where EPA and contractor staff are co-located.
Contracting Officers said they did not conduct reviews because they
did not have time given their workloads. However, in most of the
cases, the Contracting Officers were within five miles of the EPA
site, and some were even in adjacent buildings. EPA's Contracts
Management Manual states that "The Contracting Officer is
responsible for performance of all necessary actions for effective
contracting, ensuring compliance with the terms of the contract, and
safeguarding the interests of the United States in its contractual
relationships." This responsibility includes ensuring that laws and
regulations created to safeguard contracts against personal services
are implemented6.
Two of the 23 contracts reviewed were off-site contracts. Therefore, the Contracting Officers would not
conduct an on-site review.
6ORD conducts management reviews of all of its Divisions on a routine basis. ORD has worked with the
Office of Acquisition Management to include a significant contracting officer presence on ORD's 199? and 1998
management reviews. This joint effort has been made to help increase the level of contracting officer oversight of
the effectiveness of ORD's contract management controls, including those for personal services.
17
Report No. E1BMF7-23-0012- 8100251
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Audit of Personal Services
TWO CONTRACTS
WERE MANAGED
WELL TO PREVENT
PERSONAL SERVICES
Two of the contracts we reviewed, one ORD and one OW, stood
out with regard to the steps taken to prevent or avoid personal
services. Under ORD contract 68W50065, valued at over $71
million, the Project Officer was key to preventing personal
services. The Project Officer was very knowledgeable of personal
services issues and, with the assistance of ORD's Extramural
Management Specialist Network, established and implemented
effective controls. The Project Officer:
• Visits, at least every other year, each of the sites (in thirteen
cities) where about 250 contractor employees are co-located
with ORD staff on this contract. He inspects the site to
make sure that contractor space is separate and identifiable
from EPA space, and that badges are worn and phones are
answered properly. He also evaluates whether EPA staff
have supervised contractors.
• Reviews all delivery orders and ensures that the orders are
approved by delivery order project officers (DOPOs) before
the contractor begins work.
• Tracks the status of all delivery orders under the contract.
• Reviews all contractor-submitted monthly progress reports
to evaluate whether the contractor conducted work outside
the scope of the contract.
• Stresses to the DOPOs that they are to deal only with the
contractor's designated on-site delivery order manager, and
not other contractor staff.
• Tracks all of the DOPOs' training records to assure that the
DOPOs take required training as appropriate.
The DOPOs we interviewed were also knowledgeable of personal
services issues and commended the Project Officer for keeping
them informed about the contract. The DOPOs also properly
documented all work requests issued to the contractor. The
18
Report No. E1BMF7-23-0012- 8100251
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Audit of Personal Services
contractor's offices in RTF and Cincinnati were also clearly marked
as contractor occupied space.
Under contract 68C60016, the Office of Water took steps to
alleviate prior personal services concerns under the contract. Prior
to October 1997, the contract was a cost-reimbursable, level-of-
effort contract and the contractor was located in the basement of
EPA's Waterside Mall building. Without objective criteria on
which to base the contractor's performance, the Project Officer
stated that she felt like she needed to monitor the contractor's work
schedules and continually monitor what they were doing. The
Project Officer also said that when the contractor was located in the
building, she communicated with them directly and often,
OW, based on the Office of Acquisition Management's
recommendation, restructured this requirement and the Cincinnati
Contracts Division awarded a fixed-priced, performance-based
contract, effective October 1,1997. The contractor was also moved
off-site to McLean, VA. According to the Project Officer, this new
contract arrangement greatly reduced the potential for personal
services to occur. There is no incentive for the contractor to
perform extra tasks that might be outside the scope of the contract
because the contractor will not be paid for doing those tasks. The
Project Officer stated that this restructuring has helped EPA
maintain an "arms-length relationship" with the contractor. The
contract's Statement of Work also was Well-written and indicated an
awareness of the potential for personal services and established
controls to prevent such services.
CONCLUSION
Personal services activities, or the appearance of such, occurred in
over half of the contracts reviewed. On-site contracts are especially
vulnerable to personal services situations, because of the potential
for daily face-to-face interaction between EPA staff and contractors.
Program offices and contracting divisions each play an important
role in making sure that personal services do not occur. Program
office employees have the primary role in preventing personal
services because they are the personnel who work with contractors
to complete needed tasks. Contracting officials' role, although
secondary, is key in providing oversight of the legal aspects of
19
Report No. E1BMF7-23-0012- 8100251
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Audit of Personal Services
RECOMMENDATIONS
AGENCY COMMENTS
contract execution. Preventing personal services is a shared
responsibility between the program offices and the contracting
divisions. Program offices, with the help of contracting offices,
should attempt to eliminate unnecessary interactions with
contractors, including shifting work off-site if possible.
We recommend that the Acting Assistant Administrator for
Administration and Resources Management and the Agency Senior
Resource Officials:
2-1 Identify all contracts where EPA and contractors are
co-located, and evaluate and document whether any
on-site contracts can be moved off-site.
We recommend that the Acting Assistant Administrator for '
Administration and Resources Management:
2-2
2-3
Direct contracting divisions to incorporate a contract
clause similar to the one used by the Contracts
Management Division-Cincinnati ("Government
Contractor Relations") in all EPA contracts.
Direct Agency contracting officers to conduct a site
visit at least annually for all on-site contracts and
document whether personal services deficiencies
were identified. If deficiencies are identified, the
contracting officer should provide needed guidance
or recommendations to the project officer.
The Acting Assistant Administrator agreed with the above
recommendations. Regarding recommendation 2-1, the Office of
Administration and Resources Management will coordinate with
EPA program offices to conduct a review and determine if current
oni-site contractors can be moved off-site. This review will be
completed within 90 days of this report's issuance.
Regarding recommendation 2-2, the Acting Assistant Administrator
plans to develop an Agency-wide contract clause specifying proper
20
Report No. E1BMF7-23-0012- 8100251
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Audit of Personal Services
Government/Contractor relationships. He also plans to modify
EPA's Acquisition Regulation by February 1999 to include a
requirement to use the Agency-wide clause.
Regarding recommendation 2-3, the Acting Assistant Administrator
agreed that additional oversight is needed to identify instances of
personal services under on-site contracts. EPA contracting officers
will be required to perform site visits periodically for all on-site
contracts. Contracting officers will also be required to discuss
personal services issues annually with project officers for individual
on-site contracts. The Office of Acquisition Management plans to
issue a memo to contracting officers by December 1998 instructing
them of the requirement.
OIG EVALUATION The proposed Agency actions described above, when completed,
will adequately address the findings and recommendations in this
report.
U.S. EPA Headquarters Library
Mail code 3201
1200 Pennsylvania Avenue NW
Washington DC 20460
21 Report No. E1BMF7-23-0012- 8100251
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Audit of Personal Services
Exhibit 1
Page 1 of 1
Results of Review
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
IS
19
20
21
22
23
Program
Office
OPPTS
OAR
OAR
OARM
OARM
OARM
OARM
OARM
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
OSWER
OW
OW
OW
REGION 3
REGION 3
REGION 6
TOTALS
Contract
68W50008
68D40102
68D60059
68C70044
68W10055
68C40045
68W20013
68W20025
68C30322
68C40002
68C50008
68C60074
68C60082
68D30024
68D50040
68W50065
68C40022
68C30330
68C60016
68C60040
68S53002
68W40010
68W40016
Maximum
Value
$6,590,628
8,350,456
1,689,994
4,059,379
215,000,000
1,665,144
103,610,110
302,298,450
11,173,792
3,272,018
249,963
2,044,618
1, 6 15,608
1,061,661
6,815,572
71,107,726
166,621,457
7,196,198
860,636
3,726,029
66,000,000
50,000,000
30,803,580
$1,065,813,019
No Concerns
/
/
V
/
S
/
/
/
s
8 (35%)
Personal
Services
Indicators
/
/
2 (9%)
Instances or
Appearance of
Personal Services
/
/
/
/
/(Notel)
/
/
/
/
/
^
/
/
13 (56%)
Note 1: We did not review this contract but instead, with ORD's concurrence, relied on the results of its November
1997 Management Review of the CorvalHs and Newport, OR, laboratory.
22
Report No. E1BMF7-23-0012- 8100251
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Audit of Personal Services
Exhibit 2
Page! of 1
Personal Services Issues
No.
1
2
3
4'
5
6
7
8
9
10
11
12
13
Program
Office
OPPTS
OAR
OARM
OARM
ORD
ORD
ORD
ORD
ORD
OW
REGION 3
REGION 3
REGION 6
Contract #
68W50008
68D60059
68W10055
68C40045
68C40002
68C50008
68C60074
68C60082
68D30024
68C30330
68S53002
68W40010
68W40016
Contract
Type
Cost Plus
Cost Plus
Cost Plus
Fixed Price
Cost Plus
Fixed Price
Cost Plus
Fixed Price
Cost Plus
Cost Plus
Cost
Cost Plus
Cost Plus
Personal
Services Issues
1
2
3,4,5,6
4,6
5
2
1
1,6
' 2
1,2,6
3
3,4
3,5
ISSUES
1. Unauthorized EPA employees directed contractor staff.
2. Project Officer/Work Assignment Manager directed contractor staff.
3. EPA employees interacted with and directed subcontractors.
4. EPA staff recommended specific contractor personnel be hired, or staffed on
projects.
5. Close working relationships existed.
6. Statement of Work language permitted personal services to occur.
23
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Audit of Personal Services
(This page was intentionally left blank.)
24 Report No. E1BMF7-23-0012- 8100251
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Audit of Personal Services
Appendix 1
Pagel of 6
.
m
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, DC 20460
SEP 41998
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Response to Draft Report of Audit No. E1BMF7-23-0012, Review of Personal
Services
FROM: Alvin M. Peasachowitz
Acting Assistant Administrator
TO: Elissa R. Kaipf
Deputy Assistant Inspector General
Thank you for the opportunity to provide comments on the subject audit report. We agree
that personal services relationships are improper, illegal, and unallowable under EPA contracts.
Although, we concur with many of the findings in the report, it should be noted that we have made
significant progress in avoiding and eliminating personal services. It should also be noted that
while we agree that the report contained some instances of personal services, some of the activities
discussed in the report lends itself more towards indicators of personal services that requires
management attention.
Detailed comments on the final report is provided and our responses are discussed by
subject in the order of appearance in the report.
If you have any questions or comments, please call me at 260-4600, or have your staff call
Betty L. Bailey, Director, Office of Acquisition Management, at 564-4310.
Internet Address (URL) • http://www.epa.gov
Recycled/Recyclable • Printed with Vegetable Oil Based Inks on Recycled Paper (Minimum 20% Postconsumer)
Note: The original response was signed by Alvin M. Pesachowitz.
25
Report No, E1BMF7-23-0012- 8100251
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Audit of Personal Services
Appendix 1
Page 2 of 6
(1) Unauthorized EPA Employees Directed Contractor Staff
OARM Response:
68C60074, ORD - We concur with this finding. The Contracting Officer (CO) has scheduled a
meeting for the week of August 24, 1998, to visit with the program office to conduct a personal
services review and counsel the program office concerning appropriate personnel authorized to
issue technical direction. The CO will also meet with the contractor during the same week to
discuss this issue.
68C60082, ORD - We concur with this finding. During an all hands meeting held on
July 31, 1997, the Project Officer (PO) discussed the management controls and operations
guidance as it relates to this finding with all laboratory personnel. The PO also issued
instructions to laboratory personnel regarding proper procedures for interacting with contractors
on April 7, 1997, June 23, 1997, August 20, 1997 and June 24, 1998. In addition, on
May 21,1998, the CO discussed the IG findings with the PO. The CO is assured that the PO is
familiar with the Agency's responsibilities under the contract and will make every effort to comply
with the contract control procedures.
68C30330, OW - The program office does not concur with this finding. A special flash report was
issued regarding this contract (Report No. 8100092). In OW's response to the Flash Report, OW
responded that they did not believe this finding was a problem with respect to this contract
or other OW contracts. The OW and OAM is currently working on a PBSC SOW for the follow-on
requirement which would resolve this issue. We will submit the IG an estimated completion date
of the SOW within one week.
68W50008, OPPTS - We concur with this finding. However, we recommend that the draft report
be revised to acknowledge the fact that the EPA employee who interacted with the contractor at the
time of the review had completed the training required by OAM to be appointed a work assignment
manager. It was an oversight on the part of the Project Officer that the EPA 1900-65 (Nomination
and Appointment of Contracting Officer's Representative form) had not been prepared. The form
was completed July 24, 1998.
(2) Project Officers/Work Assignment Managers Directed Contractor Staff
68D60059, OAR - Regarding the issues raised in the report, the following corrective actions have
been made. On January 26, 1998, the CO counseled the program office concerning personnel
authorized to issue technical direction, the proper "chain" for all technical direction and the
requirement that direction be provided/confirmed in writing. On July 8, 1998, the CO conducted
an on-site personal services review of contractor's space. On July 15,1998, the CO held a
discussion with the contractor's Program Manager regarding personnel authorized to issue technical
direction and the requirement that direction be provided/confirmed in writing.
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Audit of Personal Services
Appendix 1
Page 3 of6
68C50008, ORD - We concur with this finding. During the week of August 12,1998, the Program
Office scheduled a meeting with all parties involved to develop an action plan. We will share the
plan with the IG upon completion by ORD.
68D30024, ORD - We concur with this finding. The CO informed the PO on February 19, 1998,
in writing of the need to reduce verbal technical direction, including clarifications, to writing within
five (5) days as required by the contract. In addition, 0AM is planning to award a new IDIQ
contract on October 30,1998; with more definitive task orders requiring less technical direction.
Some task orders are anticipated to be fixed price.
68C30330, OW - The program office does not concur with this finding. The OW and OAM is
currently working on a PBSC SOW for the follow-on requirement which would resolve this
issue. We will submit to the IG an estimated completion date of the SOW within one week.
(3) EPA Employees Interacted with and Directed Subcontractors
68W10055, OARM - We concur with this finding. The CO met with the PO and all delivery order
project officers (DOPOs) in July 1998, to remind them that EPA employees are not permitted to
provide direction to subcontractor employees.
68S53002, Region 3 - We concur with this finding. In July 1998, the Assistant Regional
Administrator (ARA) sent a memorandum to all Region III Contracting Officer Representatives
(CORs) and supervisors of CORs underscoring the importance of avoiding personal services. A
fact sheet providing examples of personal service relationships was attached to the ARA's
memorandum. The CORs have also been reminded by the CO that directions may only be given to
prime contractors and must be written. In addition, the Regional CO is planning to issue multiple
follow-on acquisitions by the third quarter of year 2000 with smaller, more discrete
work statements. Reducing contract size will increase the pool of companies competing for awards
and minimize the need for vulnerable team subcontractor arrangements.
58W40010, Region 3 - We concur with this finding. In July 1998, the ARA sent a memorandum to
all Region III CORs and supervisors of CORs underscoring the importance of avoiding personal
services. A fact sheet providing examples of personal service relationships was
attached to the ARA's memorandum. The CO also sent a message in July 1998, to the CORs
reminding them to only interact with the prime contractor. In addition, the CO sent a message in
July 1998, to the WAM reminding the WAM that all future discussions must be with the prime
contractor.
68W40016, Region 6 - We concur with this finding. Procedures were instituted in July and
August 1997, by both EPA and the contractor. The procedures consist of internal '
correspondence, training and meeting with the contractor's senior level personnel, and more closely
monitoring of contractor's performance. The procedures also assure that EPA personnel only
interact with the prime contractor's Program Managers. The CO or Contract Specialist (CS) will
meet with the PO and the prime contractor's Program Manager weekly to discuss activities under
the contract.
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Appendix 1
Page 4 of6
Both the CO and PO will review the contractor's monthly progress reports to ensure problems
are addressed and resolved promptly. Additionally, the CO and PO have initiated physical contract
monitoring checks. The Region also has bi-weekly meetings with the Work Assignment Manager
(WAM) to get feedback on the work assignments.
4. EPA Staff Recommended Specific Personnel be Hired or Staffed on Projects
68C40045, OARM - Based on the issues raised in the report regarding this contract, the PO
denied having discussed or recommended to the follow-on contractor, what employees the
contractor should hire. The program have scheduled training for all OARM project officers,
work assignment managers, and delivery order officers. The training is scheduled for
August 1998, and will focus on roles and responsibilities of program personnel.
68W10055, OARM - We agree with this finding. The CO met with the PO and DOPO in
July, 1998, to discuss the audit finding and remind them not to discuss or recommend personnel
selection.
68W400IO, Region 3 - In July, 1998, the ARA sent a memorandum to all Region III CORS and supervi
of CORS underscoring the importance of avoiding personal services. A fact sheet
providing examples of personal service relationships was attached to the ARA's memorandum.
The CO also sent a message in July, 1998, to the CORS reminding them to only interact with the
prime contractor.
5. Close Working Relaf ionsh ips Existed
68C40002, ORD - We concur with this finding. The current contract expires
September 30, 1998. The solicitation for the follow-on was issued June 22, 1998, and an award
is expected before the current contract expires. The original acquisition package contained
language in the SOW which legitimized technical directives issued by the PO as work ordering
mechanisms. However, the CO modified the SOW to remove all such references prior to issuing
the solicitation and has counseled the PO and his managers about the requirement for detailed work
assignments to be issued only by the CO. The CO scheduled a site visit to Newport and Corvallis
during the week of August 3, 1998, during which time, further personal services assessment was.
made. In addition to the personal services review by the CO, reiteration of existing policies,
guidance/instruction regarding avoidance of personal services and appropriate management of
government facilities were provided to the PO and WAMs. The CO also discussed property issues
with DCMC to ensure the contractor is adequately recording, tracking, and reporting all
government facilities in accordance with EPA policy.
68W10055, OARM - We concur with this finding. As stated in the draft audit report, the statement
of work (SOW) for the follow-on for the MOSES contract has been revised to
eliminate all language requiring coordination between the contractor and anyone other than
appropriate EPA officials.
sors
28
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Audit of Personal Services
Appendix 1
Page 5 of6
The SOW has been changed to eliminate references to the leasing of space other than to say that
the contractor must be accessible in the Washington D.C. area, and the majority of the task
included in the SOW are performance-based.
68W40016, Region 6 - Regarding this finding, the program office did not have "offices" in the
contractor's space. EPA personnel utilized the contractor's space for a limited time and only for
purposes related to monitoring the work assignment and developing tasks for performance by the
contractor. Access to voluminous documents being handled by the contractor was necessary in
order to develop these incremental tasks. At times, prolonged access to the documents was
necessary in order to characterize the tasks.
(6) Statement of Work Contained Language Allowing Personal Services
68Wl 0055, OARM - We agree with this finding. As stated in the draft audit report, the
statement of work (SOW) for the follow-on for the MOSES contract has been revised to
eliminate all language requiring coordination between the contractor and anyone other than
appropriate EPA officials. The SOW has been changed to eliminate references to the leasing of
space other than to say that the contractor must be accessible in the Washington D.C. area, and
the majority of the tasks included in the SOW are performance-based.
68C60082, ORD - We concur with this finding. The CO issued a contract modification on
August 3, 1998, removing the inappropriate language from the contract.
68C40045, OARM - We concur with this finding. The CO issued a contract modification on
August 3,1998, removing the inappropriate language from the contract.
Recommendation 2-1
OIG: Recommend that the Acting Assistant Administrator for Administration and Resources
Management and the Agency Senior Resource Officials identify all contracts where EPA and
contractors are co-located, and evaluate and document whether any on-site contracts can be moved
off-site.
OARM Response: We agree with the OIG recommendation. However, we will need to coordinate
with our program offices any decisions to move contractors currently working at EPA locations.
Within 90 days of issuance of the final audit report, we will complete our review and analysis of
whether contractors working at EPA locations can be moved off-site.
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Audit of Personal Services
Appendix 1
Page 6 of 6.
Recommendation 2-2
OIG: Recommend that the Acting Assistant Administrator for Administration and Resources
Management direct contracting divisions to incorporate a contract clause simitar to the one used by
the Contracts Management Division-Cincinnati ("Government Contractor Relations") contracts.
OARM Response: We agree with the OIG recommendation. The process of developing an
Agency-wide clause, including modifying the EPAAR, will take approximately 7 months
(February, 1999).
Recommendation 2-3
OIG: Recommend that the Acting Assistant Administrator for Administration and Resources
Management direct Agency contracting officers to conduct a site visit at least annually for ail on-
site contracts and document whether personal services deficiencies were identified. If
deficiencies are identified, the contracting officer should provide needed guidance or
recommendations to the project officer.
OARM Response: We agree with OIG recommendation. Additional oversight is needed to
identify instances of personal services under on-site contracts. However, budget constraints may
preclude annual site visits, as many contracts are administered by COs in a different geographical
location from the on-site work. We recommend that the COs perform on-site visits periodically on
all on-site contracts, and if weaknesses are identified, the COs will perform annual visits. In
addition, EPA will direct COs to discuss personal services issues with POs for individual on-site
contracts on an annual basis. OAM will issue a memo to the COs instructing them of this
requirement by December, 1998.
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Appendix 2
Page 1 of2
Distribution
Office of Inspector General
Acting Inspector General (2410)
Deputy Assistant Inspector General for Internal Audits (2421)
Headquarters Offices
Acting Assistant Administrator for Administration and Resources Management (3101)
Agency Senior Resource Officials
Chief Financial Officer (2710)
Director, Office of Acquisition Management (3801R)
Director, Office of Policy and Resources Management (3102)
Special Assistant to Director, Office of Acquisition Management (3801R)
Audit Coordinator, Office of Acquisition Management (3802R)
Audit Coordinator, Office of Administration and Resources Management (3102)
Audit Follow-up Coordinator (2724)
Agency Follow-up Official (2710)
Audit Liaison, Office of Research and Development (8102R)
Audit Liaison, Office of Air and Radiation (6102)
Audit Liaison, Office of Enforcement and Compliance Assurance (2201 A)
Audit Liaison, Office of Solid Waste and Emergency Response (5103)
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Page 2 of 2
Audit Liaison, Office of Water (4102)
Headquarters Library
Regional Offices
Regional Administrators
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