U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Quick Reaction Report
Hotline Allegations
Unsubstantiated, but Region 7
Contract Administration and
Award Issues Identified
Report No. 11-P-0217
May 4, 2011
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Report Contributors: Michael Petscavage
David Penman
Brad Jones
Doug LaTessa
Abbreviations
ASW ASW Associates, Inc.
CO Contracting Officer
D&F Determination and Finding
DOE U.S. Department of Energy
EPA U.S. Environmental Protection Agency
FAR Federal Acquisition Regulation
IDIQ Indefinite Delivery/Indefinite Quantity
OIG Office of Inspector General
T&M Time and Materials
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail: OIGJHotline@epa.gov write: EPA Inspector General Hotline
phone: 1-888-546-8740 1200 Pennsylvania Avenue NW
fax: 703-347-8330 Mailcode 8431P (Room N-4330)
online: http://www.epa.gov/oig/hotline.htm Washington, DC 20460
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
11-P-0217
May 4, 2011
Catalyst for Improving the Environment
Why We Did This Review
We received a Hotline complaint
regarding a U.S. Environmental
Protection Agency (EPA)
contract with ASW Associates,
Inc. (ASW). The allegations were
that EPA replaced Superfund
appropriations with American
Recovery and Reinvestment Act
of 2009 (Recovery Act) funds
and that EPA unfairly terminated
the ASW contract.
Background
EPA awarded ASW a Superfund
contract for environmental
remediation services in
September 2008. In January
2009, the U.S. Department of
Energy (DOE) suspended ASW
from contracting with
government agencies for
submitting to them invoices with
false certifications. EPA awarded
a second contract to a different
contractor to obtain the same
services, as EPA did not know
when DOE would lift the
suspension. The Federal
Acquisition Regulation prohibits
agencies from renewing with a
suspended contractor unless the
agency head agrees.
For further information,
contact our Office of
Congressional, Public Affairs and
Management at (202) 566-2391.
The full report is at:
www.epa.qov/oiq/reports/20117
20110504-11-P-0217.pdf
Hotline Allegations Unsubstantiated, but Region 7
Contract Administration and Award Issues Identified
What We Found
The complainant's allegations were not substantiated. No funds were replaced
on the ASW contract. The contract was solely funded with Superfund
appropriations and no Recovery Act appropriations were obligated on the ASW
contract. Secondly, the ASW contract was not terminated for convenience as
alleged; EPA simply elected not to exercise the second option.
EPA could have awarded a less risky contract type. EPA awarded a time and
materials (T&M) contract to ASW, but could have awarded a lower-risk
fixed-price type contract. According to the contracting officer, Region 7
awarded a T&M contract because the program office was reluctant to use a
fixed-price type contract due to the environmental unknowns surrounding the
site to be cleaned up.
EPA did not perform some required contract administration functions. The
contracting officer did not conduct required annual invoice reviews even
though DOE suspended ASW during the base period of the contract for
submitting invoices with false certifications. Also, EPA did not conduct an
interim contractor performance evaluation despite several performance issues
that EPA staff identified. The contracting officer cited not having time to
perform the annual invoice reviews or the interim performance evaluations. As
a result, Region 7 does not have assurances that the contractor and EPA project
staff were fulfilling their roles, and other potential clients were not made aware
of ASW's performance on this contract.
What We Recommend
We recommend that Region 7(1) revise the Region 7 peer review checklist to
require review of the pre-award file to ensure proper documentation and
support for the contract type selected, (2) provide clarification to contracting
officers on T&M contracts and annual invoice reviews, (3) implement a
process to ensure annual invoice reviews are completed by contracting officers,
and (4) prepare and submit a contractor performance evaluation for the ASW
contract in the Contractor Performance Assessment Reporting System as
required. EPA Region 7 generally agreed with the recommendations in the
draft report and provided corrective actions or acceptable alternatives. The
completed and planned actions address the intent of the recommendations in
the report.
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z UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
**^^^ •" WASHINGTON, D.C. 20460
\
THE INSPECTOR GENERAL
May 4, 2011
MEMORANDUM
SUBJECT: Hotline Allegations Unsubstantiated, but Region 7
Contract Administration and Award Issues Identified
Report No. ll-P-0217
X
//^// // V///L
FROM: Arthur A. Elkins, Jr.
Inspector General
TO: Karl Brooks
Regional Administrator, Region 7
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). This report contains findings that describe the
problems the OIG has identified and corrective actions the OIG recommends. This report
represents the opinion of the OIG and does not necessarily represent the final EPA position.
Final determinations on matters in this report will be made by EPA managers in accordance with
established audit resolution procedures.
The estimated direct labor and travel costs for this report are $85,533.
Action Required
In responding to the draft report, the Agency provided a corrective action plan for addressing the
recommendations. Therefore, a response to the final report is not required. The Agency should
track corrective actions not implemented in the Management Audit Tracking System. We have
no objections to the further release of this report to the public. The report will be available at
http://www.ega.gov/oig.
If you or your staff have any questions, please contact Melissa Heist, Assistant Inspector General
for Audit, at 202-566-0899 or heist.melissa@epa.gov: or Janet Kasper, Director, Contracts and
Assistance Agreement Audits, at 312-886-3059 or kasper.janet@epa.gov.
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Hotline Allegations Unsubstantiated, but Region 7 11-P-0217
Contract Administration and Award Issues Identified
Table of Contents
Purpose 1
Background 1
Scope and Methodology 2
Results of Review 3
Complainant Allegations Not Valid 3
Region 7 Could Have Used a Less Risky Contract Type 4
Annual Invoice Review Not Conducted 6
Contractor Performance Evaluation Not Conducted 7
Recommendations 7
Agency Response and OIG Comment 8
Status of Recommendations and Potential Monetary Benefits 9
Appendices
A Agency Response to Draft Report 10
B Distribution 14
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Purpose
The Office of Inspector General (OIG) of the U.S. Environmental Protection
Agency (EPA) receives hotline complaints of fraud, waste, and abuse within EPA
programs and operations. In June 2010, a complainant alleged that EPA Region 7
possibly replaced appropriated funds for a contract with ASW Associates, Inc.,
with American Recovery and Reinvestment Act of 2009 (Recovery Act) funds
and used the appropriated funds for another project. The complainant also alleged
that EPA terminated an ASW contract for the convenience of the government and
awarded a contract to another contractor that had higher rates. Based on the
complainant's allegations, our objectives were to determine whether Region 7:
• Replaced appropriated funds with Recovery Act funds
• Terminated the ASW contract for the convenience of the government
Background
Region 7 awarded EPA contract number EP-R7-08-15 on September 26, 2008, to
ASW to perform a remedial action for lead-contaminated residential property
surface soil at the Madison County Mines Superfund site. The contract included a
1-year base period and two 1-year option periods. EPA had the choice to exercise
the first option after the base period expired and could reassess again before
exercising the second option. The maximum value of the contract was
$24,345,902. As of November 2010, EPA paid the contractor $5,471,001 for the
base period and the first option period. In January 2009, around the same time
ASW began remediation work on the Superfund site, the U.S. Department of
Energy (DOE) suspended ASW for submitting invoices containing false
certifications to the Argonne National Laboratory, a DOE contractor.
In February 2009, Region 7 informed ASW that it would likely receive Recovery
Act funding, and Region 7 was considering a variety of options to implement the
Recovery Act, including exercising one or both of the options on the ASW
contract. After becoming aware of the ASW suspension, Region 7 informed ASW
that it would have to be removed from the excluded parties list1 before Region 7
would decide to exercise the next option period. The Federal Acquisition
Regulation (FAR) Subpart 9.405-l(b) prohibits federal agencies from exercising
options with suspended contractors unless the agency head makes a compelling
reason to justify the action.
In March 2009, Region 7 informed ASW that EPA had received Recovery Act
funding for the Superfund program and that it was beginning the process to
1 Provided as a public service by the General Services Administration for the purpose of efficiently and conveniently
disseminating information on parties that are excluded from receiving federal contracts, certain subcontracts, and
certain federal financial and nonfinancial assistance and benefits, pursuant to the provisions of 31 U.S. Code 6101,
note, Executive Order 12549, E.O. 12689, 48 Code of Federal Regulations 9.404, and each agency's codification of
the Common Rule for Nonprocurement suspension and debarment.
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obligate the Recovery Act funding. The goal of the Recovery Act was to obligate
all funding by September 30, 2009—near the time that the base period of the
ASW contract would expire. Region 7 stated in the March letter that due to the
human health risk at the Madison County Mines Superfund site and the need to
obligate Recovery Act funds quickly, a decision would be made on April 1, 2009,
whether to exercise the option in the ASW contract. Region 7 contracting staff
informed the OIG that they contacted DOE to learn if DOE intended to terminate
the ASW suspension. According to Region 7, DOE did not have plans at that time
to terminate the suspension.
In April 2009, Region 7 informed ASW that it would not exercise the first option
on the ASW contract because FAR 9.405-1(3) does not allow, without compelling
reasons, exercising options for contracts where the contractor has been suspended.
Region 7 then began the acquisition process to award a separate contract to a new
contractor for the same services by executing a determination and finding (D&F)
for a new contract.
On August 25, 2009—approximately 1 month before the base period on the ASW
contract was to expire—DOE terminated the ASW suspension after ASW:
(1) acknowledged negligence relating to inaccurate billing procedures,
(2) committed to pay a civil judgment and improve internal controls, and (3)
agreed to obtain a satisfactory Defense Contract Audit Agency audit. Although
Region 7 was ready to award the second contract to another contractor to obtain
the required remediation services in Madison County, it exercised the first option
period on the ASW contract. According to Region 7 officials, the amount of work
in Madison County justified two contracts operating simultaneously for 1 year.
On September 9, 2009, EPA exercised the first option period on the ASW
contract through a modification of the contract. In that modification, EPA stated
that the ASW contract would end after the option period expired. EPA awarded a
second contract to another contractor on September 29, 2009. That contract
included a 2-year base period and a 1-year option.
Scope and Methodology
We conducted our review from September to December 2010 in accordance with
generally accepted government auditing standards. Those standards require that
we plan and perform our review to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our
objectives. We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our objectives.
To accomplish our objectives, we reviewed documents provided by the
complainant as well as ASW and Region 7. We conducted interviews with the
complainant; ASW officials; and relevant EPA Region 7 staff in Kansas City,
Kansas. We reviewed (1) the contracting officer's (CO's) pre-award and contract
file for the ASW contract, (2) communications between Region 7 and ASW,
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(3) the award and administration of the ASW contract, and (4) the FAR and
Agency guidance pertaining to contract award and administration. This included,
but was not limited to:
• FAR Subpart 9.4 - Debarment, Suspension, and Ineligibility
• FAR Part 16 - Types of Contracts
• FAR Subpart 17.2 - Options
• EPA Contracts Management Manual
We reviewed a prior EPA OIG report regarding contractor performance
evaluations, EPA OIG Report 10-R-0113, EPA Should Improve Its Contractor
Performance Evaluation Process for Contractors Receiving Recovery Act Funds,
issued April 26, 2010. In response to one of our recommendations, Office of
Acquisition Management stated that it planned to begin using the U.S.
Department of Defense Contractor Performance Assessment Reporting System on
May 1, 2010, to replace the National Institutes of Health Contractor Performance
System. According to EPA, the Contractor Performance Assessment Reporting
System provides an enhanced and more effective capability to monitor the
timeliness and quality of contractor evaluations. COs must also certify the
accuracy and completeness of the information entered.
Internal Control Structure
In planning and performing our audit, we reviewed management controls related
to our objectives. We reviewed the Region 7 Contracting Quality Assurance Plan
along with the EPA's Contracts Management Manual. There were no previous
audits of EPA's administration of the ASW contract.
Results of Review
Complainant Allegations Not Valid
The complainant alleged that EPA Region 7 possibly replaced a portion of
appropriated funds with Recovery Act funds, and used the original funds on
another project. We found that no funds were replaced on this contract. The
contract was solely funded with Superfund appropriations and no Recovery Act
appropriations were obligated on the ASW contract. Secondly, the complainant
alleged that EPA terminated the contract for the convenience of the government
and gave it to another contractor that had higher rates. The ASW contract was not
terminated for convenience; instead, option 2 of the contract was not exercised.
Further, EPA only procured another contractor because ASW was suspended and
it was unclear when the suspension would be lifted. Under the circumstances,
EPA Region 7 acted prudently to ensure that EPA had another contractor in place
to perform the work. The second contract was awarded with adequate price
competition to the lowest responsive bidder. ASW submitted a proposal for that
contract. However, its bid was 59 percent higher than the winning bid.
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Region 7 Could Have Used a Less Risky Contract Type
Region 7 awarded a time and materials (T&M) contract to ASW in September
2008 for environmental remediation services although a less risky contract type
would have been a better option. The FAR states that a fixed-type contract is
suitable, for example, when there is adequate price competition and reasonable
price comparisons with prior purchases of similar services can be made.
According to the contracting officer, Region 7 awarded a T&M contract because
the program office was reluctant to use a fixed-price type contract because there
were too many environmental unknowns surrounding the site to be cleaned up.
There also was confusion throughout the acquisition process regarding the type of
contract to award. Fixed-price type contracts are generally less risky for
government contracts.
The FAR identifies circumstances when a fixed-price type contract is feasible.
FAR Subpart 16.202 states that a firm-fixed price contract is suitable for
acquiring services when the CO can establish fair and reasonable prices, such as
when:
• There is adequate price competition.
• There are reasonable price comparisons with prior purchases of the same
or similar supplies or services when made on a competitive basis or
supported by valid certified cost or pricing data.
• Available cost or pricing information permits realistic estimates of the
probable costs of performance.
• Performance uncertainties can be identified and reasonable estimates of
their cost impact can be made, and the contractor is willing to accept a
firm-fixed price representing assumption of the risks involved.
FAR Subpart 16.104 discusses factors the government should consider when
selecting contract types. Those factors include price competition. Per the FAR,
effective price competition normally results in realistic pricing, and a fixed-price
contract is ordinarily in the government's interest. The FAR states that when
using a T&M contract, the CO must execute a D&F stating that no other contract
type is suitable.
Region 7 could have awarded a less risky contract type. Region 7 obtained this
type of work before under a previous contract, and as a result, had historical data
from 2003-2006 on the cost to remediate properties in the same location where
EPA awarded the T&M contract to ASW. Region 7 had data on the average cubic
yards per property for work done at the site. In its individual acquisition plan for
this contract, EPA noted that the risk on the acquisition was somewhat minimized
by the number of similar projects already completed across the Agency.
Region 7 expected reasonable price competition when it planned the acquisition.
In its individual acquisition plan, Region 7 noted that there were a significant
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number of small businesses that were eligible to respond. Region 7 stated that
numerous small businesses existed in the affected area, the region, and across the
country that were qualified to pursue the work. Finally, Region 7 noted that it
anticipated adequate competition in the marketplace to ensure an adequate
number of interested parties. Ten contractors responded to the solicitation, with
eight providing complete pricing data.
Region 7 awarded a T&M contract because the program office was reluctant to
use a fixed-price type contract. According to the CO who awarded the contract,
Region 7 program staff believed that there were too many unknowns surrounding
the Madison County site to award a fixed-price contract. However, during the pre-
bid conference, a prospective contractor asked why Region 7 was awarding a
T&M contract rather than a fixed-price contract, as a fixed-price contract would
save the government money. Region 7 responded that there were too many
unknowns, and paying by the hour would minimize contractors' risk and place
some of the risk on EPA to ensure the contractor was efficient and economical.
However, the claim that there were too many unknowns is not convincing given
the existence of the historical data (including both the cost of dirt removed and
average amount of dirt per property) and history with this type of work. Further,
not long after ASW began work (approximately 4 months), Region 7 executed a
D&F stating that a fixed-price type contract was the preferred contract type and
later awarded a fixed rate contract for the same services.
There also was confusion throughout the process regarding the type of contract to
be procured. The contract type was not fully understood by regional staff even
after the contract's period of performance had expired. For example, during the
OIG kickoff meeting with Region 7, the program staff thought the contract was an
indefinite delivery/indefinite quantity (IDIQ) type contract instead of a T&M.
IDIQ contracts are used to acquire supplies and/or services when the exact times
and/or exact quantities of future deliveries are not known at the time of contract
award. Adding to the confusion were the following:
• EPA's active contracts list identified the ASW contract as firm-fixed
price.
• The D&F was for the authority to use an IDIQ fixed-rate contract. The
D&F also should have stated that no other contract type was suitable but
did not.
• Region 7 awarded the contract using the sealed-bidding process. The FAR
states that contracts resulting from sealed bidding shall be firm-fixed price
or fixed-price contracts with economic price adjustment.
• The performance work statement identified the contract as an IDIQ
contract.
• The synopsis of the contract listed in Federal Business Opportunities
stated that the contract to be awarded was an IDIQ fixed-rate contract.
• The solicitation for the contract stated that EPA was contemplating
awarding a fixed-rate T&M contract.
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Clauses included in the contract were also confusing. According to the CO who
signed the contract, Region 7 acquired non-commercial services for the contract.
However, there were clauses in the contract dealing with commercial items, as
well as change clauses related to fixed-price contracts. None of the contract
inconsistencies were discovered because although the Region 7 Quality
Assurance Plan requires a review of pre-award source selection documentation
prior to award, only the solicitation document was reviewed. We confirmed with
the Region 7 acquisition branch chief that only the solicitation documentation was
reviewed as part of the quality assurance plan for the ASW contract.
Finally, the inexperience of the CO awarding and administering the contract may
have been a contributing factor to some of the confusion. A senior CO signed the
contract because the CO responsible for the contract did not have a Level III
(unlimited) warrant until 18 months after the ASW contract was awarded, but the
CO was responsible for preparing the D&F and other actions before contract
award. According to the Region 7 acquisitions branch chief, this was the first site-
specific contract that the CO had managed.
The contract type selected by EPA placed unnecessary risk on the government
and provided little incentive for the contractor to ensure efficient and economical
performance. In fact, the project staff reported that ASW's cost per cubic yard
was double previous work at the site.
Annual Invoice Review Not Conducted
The CO did not conduct an annual invoice review for the ASW contract in the
base or the option period. As noted above, shortly after EPA awarded the contract,
DOE suspended ASW for submitting invoices containing false certifications.
EPA's Contracts Management Manual requires the CO to conduct at least one
detailed invoice review per year. COs perform these reviews to ensure that the
contractor and project officers are fulfilling their roles properly and that all issues
relevant to contract performance are being addressed. After DOE suspended
ASW, EPA's risk increased and made performing these reviews even more
important. The CO cited not having time to review the invoices due to challenges
with the contract. The CO did suspend costs on 17 of 34 invoices submitted by the
contractor, but this was based on invoice reviews performed by the project officer,
and not reviews done by the CO. Region 7 does not have a tracking system to
ensure that COs conduct the necessary reviews. As a result, Region 7 did not have
assurances that the contractor and EPA program staff were fulfilling their roles
properly, nor did the region have assurances that all issues relevant to contract
performance and funding were being addressed.
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Contractor Performance Evaluation Not Conducted
The CO did not perform an interim contractor performance evaluation after the
base year. The contract required the CO to complete a contractor performance
report within 90 days after the end of each 12 months of contract performance, or
after the last 12 months of contract performance. Considering the concerns
Region 7 had with the contractor's performance, an interim evaluation, while not
required, would have been beneficial. The CO stated that she did not have time to
perform the contractor performance evaluation after the base year due to the many
challenges that the CO faced managing the contract. The Region 7 acquisitions
branch chief stated that the region thought the contract was going to end after the
base period expired, so an interim report was a lower priority due to resource
constraints. Although Region 7 did not prepare an evaluation of the contractor's
performance, the start of work on the contract was delayed for approximately
3 months because the contractor could not obtain a payment and performance
bond. Further, ASW did not inform Region 7 that it had been suspended.
Region 7 learned of the suspension from another contractor. Finally, the CO
provided the contractor a three-page document citing examples of performance
issues that needed to be addressed near the end of the base period. EPA should
have reported these issues in the performance evaluation. Performance
evaluations are available to other federal agencies to consider when ordering new
contracts. Because EPA did not submit a performance evaluation, other potential
clients are not aware of ASW s performance on this contract.
Recommendations
We recommend that the Regional Administrator, Region 7, require the Region 7
Acquisition and Contracts Management Branch to:
1. Revise the Region 7 peer review checklist to include a review of the pre-
award contract file documentation in its entirety prior to award to support
the contract type selected.
2. Review active contracts to ensure that proper D&Fs were executed and the
contracts contain the correct clauses.
3. Provide clarification to COs, through a briefing, newsletter, etc., on when
to use T&M contracts.
4. Provide clarification to COs, through a briefing, newsletter, etc., regarding
the requirements of annual invoice reviews.
5. Implement a process to ensure COs conduct annual invoice reviews.
6. Prepare a contractor performance evaluation for ASW and input it into the
Contractor Performance Assessment Reporting System as required.
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Agency Response and OIG Comment
EPA Region 7 generally agreed with the recommendations in the draft report and
provided corrective actions or acceptable alternatives, as well as milestone dates.
The completed and planned actions address the intent of the recommendations in
the report. Region 7 modified its peer review checklist, rather than the Quality
Assurance Plan, to include all aspects of the pre-award phase and to ensure the
entire contract file is reviewed prior to award. We modified our final report
recommendation accordingly. The region is in the process of conducting a full
review of all active contracts. This is anticipated to be completed by December
31, 2011. Additionally, the Regional Acquisition Manager held discussions with
the Acquisition and Contracts Management Section staff regarding the importance
of identifying the correct contract type vehicle along with providing further
training opportunities for identifying contract types, including T&M contracts, on
April 13, 2011, and during the summer of 2011. Similarly, discussions and
refresher training have been held on conducting invoice reviews. Region 7
implemented a process to ensure COs conduct annual invoice reviews and
modified the Quality Assurance Plan Checklist to include a review of the CO
annual invoice review. Finally, in responding to the last recommendation,
Region 7 is in the process of conducting a contractor performance evaluation for
ASW and expects it to be completed by September 30, 2011.
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Status of Recommendations and
Potential Monetary Benefits
Rec. Page
No. No.
Subject
RECOMMENDATIONS
Status1
Action Official
Actual/Planned
Completion
Date
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Claimed Agreed-To
Amount Amount
7 Require the Region? Acquisition and Contracts C
Management Branch to revise the Region 7 peer
review checklist to include a review of the pre-
award contract file documentation in its entirety
prior to award to support the contract type
selected.
7 Require the Region 7 Acquisition and Contracts 0
Management Branch to review active contracts to
ensure that proper D&Fs were executed and the
contracts contain the correct clauses.
7 Require the Region 7 Acquisition and Contracts
Management Branch to provide clarification to
CDs, through a briefing, newsletter, etc., on when
to use T&M contracts.
7 Require the Region 7 Acquisition and Contracts
Management Branch to provide clarification to
COs, through a briefing, newsletter, etc.,
regarding the requirements of annual invoice
C
Regional Administrator,
Region 7
Regional Administrator,
Region 7
Regional Administrator,
Region 7
Regional Administrator,
Region 7
1/28/2011
12/31/2011
04/13/2011
03/09/2011
7 Require the Region 7 Acquisition and Contracts
Management Branch to implement a process to
ensure COs conduct annual invoice reviews.
7 Require the Region 7 Acquisition and Contracts
Management Branch to prepare a contractor
performance evaluation for ASW and input it into
the Contractor Performance Assessment and
Reporting System as required.
Regional Administrator,
Region 7
Regional Administrator,
Region 7
03/16/2011
9/30/2011
0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
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Appendix A
Agency Response to Draft Report
Apr 01 2011
MEMORANDUM
SUBJECT: Hotline Allegations Unsubstantiated, but Region 7 Contract Administration and
Award Issues Identified,
Draft Report No. OA-FY10-0253, dated March 4, 2011
FROM: Karl Brooks
Regional Administrator
TO: Arthur A. Elkins, Jr.
Inspector General
Thank you for the opportunity to review and respond to the Office of Inspector General
(OIG) subject draft report. As you will see below, Region 7 generally concurs with OIG
recommendations. Region 7 implemented, or is in the process of implementing all
recommendations, although with slight modifications to recommendations 1 and 2. However,
there are some factual inaccuracies in the report we feel require clarification.
The draft report states a Time and Materials (T&M) contract was awarded because
Region 7 Superfund program staff was resistant to awarding a fixed price contract. This stand
alone statement does not adequately portray the comprehensive decision process Region 7's
Superfund program staff and Region 7's Acquisition and Contracts Management Section
(ACMS) staff used to determine contract type. The statement that the program technical staff
was resistant should be expanded to say they were ultimately resistant because they did not have
a high degree of confidence and reliance on the available information and that there were too
many environmental unknowns to have a fixed price contract.
Contracting Officers (COs) understand there are complexities and environmental
unknowns associated with each site specific location, and consideration is given to the technical
aspects of the requirement and the opinions of the program technical staff as to possible methods
for pricing when crafting a suitable contract. However, the final decision, utilizing all
procurement information, is that of the CO and it remains the opinion of the CO, the Senior CO
and the Regional Acquisition Manager, that the appropriate contract type was utilized.
A second inaccuracy is that the draft report places much emphasis on a fixed price follow
on contract. Although the Determination and Findings (D&F) for the follow on contract states
fixed price, the contract is actually an indefinite quantity. The follow on contract contains fixed
unit prices for estimated quantities. The D&F is being corrected.
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Lastly, the draft report asserts the Region 7 Acquisitions Branch Chief stated Region 7
thought the contract was going to end so an interim report would not be necessary. This
statement does not reflect the full discussion. The Regional Acquisition Manager is fully aware
of the importance and requirement to complete contractor evaluations at specific intervals and
within specific timeframes, and explained the performance evaluation for ASW had become a
lower priority due to workload constraints.
The following provides you with a status of corrective actions.
OIG Recommendation 1:
Revise the Region 7 Quality Assurance Plan to include a review of the pre-award contract file
documentation in its entirety prior to award to support the contract type selected.
Region 7 Corrective Action:
The recommendation is to revise the Region 7 Quality Assurance Plan (QAP) and though this
appears to be a plausible recommendation, the QAP is designed to evaluate the effectiveness of
contract actions which have occurred.
To ensure the entire contract file is reviewed prior to award, Region 7 has modified the Peer
Review Checklist, to now include all aspects of the pre-award phase. Peer reviewers are
required to annotate that all documents are present and have been reviewed, prior to a contact
award.
OIG Recommendation 2:
Review active contracts to ensure that proper D&Fs were executed and the contracts contain the
correct clauses.
Region 7 Corrective Action:
Region 7 has 46 active contracts. The Regional Acquisition Manager has implemented a process
to ensure a full review of each contract. Seven contracts are currently being reviewed and the
remaining reviews are anticipated to be completed by December 31,2011. A record of findings
and corrective actions will be retained.
OIG Recommendation 3:
Provide clarification to COs, through a briefing, newsletter, etc., on when to use T&M contracts.
Region 7 Corrective Action:
As soon as the confusion between the contract documents was identified, the Regional
Acquisition Manager immediately began discussions with staff on contract types and has
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continued to focus on the importance of identifying and supporting the appropriate contract type
vehicle.
On April 13, 2011, Region 7's ACMS staff will receive refresher training on T&M contracts.
This training will include instruction and review of Federal Acquisition Regulation Part 16, and
discussion of the various contract types. Further, the Office of General Counsel is presenting a
training session in Region 7 on contract types; this training is tentatively scheduled for summer
2011.
OIG Recommendation 4:
Provide clarification to COs, through a briefing, newsletter, etc., regarding the requirements of
annual invoice reviews.
Region 7 Corrective Action:
The Regional Acquisition Manager held discussions with ACMS staff reminding them of the
requirement to conduct invoice reviews, immediately after discussions with OIG. Also, as
mentioned to OIG, Region 7 acknowledges the annual invoice review was not performed for the
ASW contract; however, the annual invoice reviews are and were performed on other contracts.
On March 9, 2011, the Region 7 ACMS staff received refresher training on the Office of
Acquisition Management (OAM) guidance for conducting annual invoice reviews. All staff
members received a hardcopy of OAM's invoice review guidance.
OIG Recommendation 5:
Implement a process to ensure COs conduct annual invoice reviews.
Region 7 Corrective Action:
Region 7 has developed and implemented a process designed to ensure that COs conduct annual
invoice reviews. Region 7's Quality Assurance Plan Checklist was modified to include a review
of the CO annual invoice review.
OIG Recommendation 6:
Prepare a contractor performance evaluation for ASW and input it into the Contractor
Performance Assessment Reporting System as required.
Region 7 Corrective Action:
The contractor performance evaluation for ASW is underway. Input in the Contractor
Performance Assessment Reporting System is anticipated to be complete by September 30, 2011.
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Should you have any questions concerning Region 7's corrective actions, please contact
Lee Thomas, Regional Acquisition Manager, at (913) 551-7739, or Kathy Finazzo, Regional
Audit Follow-Up Coordinator, at (913) 551-7833.
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Appendix B
Distribution
Office of the Administrator
Regional Administrator, Region 7
Agency Followup Official (the CFO)
Agency Followup Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Director, Office of Acquisition Management, Office of Administration and
Resources Management
Regional Acquisition Manager, Region 7
Audit Followup Coordinator, Region 7
Audit Followup Coordinator, Office of Acquisition Management
11-P-0217 14
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