U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Weak Management of a
Climate Change Services
Contract Creates Risk
EPA Did Not Receive Services
for Which It Paid
Report No. 14-P-0272
May 30, 2014
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Report Contributors:
Hilda Canes Garduno
Ming Chang
Eric Lewis
Byron Shumate
Abbreviations
COR
Contracting Officer's Representative
EPA
U.S. Environmental Protection Agency
EPAAR
EPA Acquisition Regulation
FAR
Federal Acquisition Regulation
G&A
General and Administrative
MPRs
Monthly Progress Reports
OAM
Office of Acquisition Management
OARM
Office of Administration and Resources Management
OIG
Office of Inspector General
SOW
Statement of Work
T&M
Time-and-materials
Hotline
To report fraud, waste or abuse, contact us
through one of the following methods:
email:
OIG Hotline@epa.aov
phone:
1-888-546-8740
fax:
1-202-566-2599
online:
http://www.epa.aov/oia/hotline.htm
write:
EPA Inspector General Hotline
1200 Pennsylvania Avenue, NW
Mailcode 2431T
Washington, DC 20460
Suggestions for Audits or Evaluations
To make suggestions for audits or evaluations,
contact us through one of the following methods:
email: OIG WEBCOMMENTS@epa.gov
phone: 1-202-566-2391
fax: 1-202-566-2599
online: http://www.epa.g0v/0ig/c0ntact.html#Full Info
write: EPA Inspector General
1200 Pennsylvania Avenue, NW
Mailcode 241OT
Washington, DC 20460
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May 30, 2014
* U.S. Environmental Protection Agency 14-P-0272
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At a Glance
Why We Did This Review
The U.S. Environmental
Protection Agency's (EPA's)
Office of Inspector General
conducted this review to
assess agency controls and
processes for managing a time-
and-materials (T&M) contract.
We selected one contract to
determine whether: (1) the EPA
has procedures that require the
verification of contractor
personnel as having the
qualifications and credentials
specified in the contract;
(2) the implementation of that
verification process is effective;
and (3) the EPA received the
level of services for which the
agency paid.
The contract, EP-W-07-067
("Technical and Outreach
Support Services for Domestic
and Global Climate Initiatives
and Global Climate Change
Programs"), was awarded by
the EPA's Office of
Administration and Resources
Management.
This report addresses the
following EPA goal or
cross-cutting strategy:
Embracing EPA as a high-
performing organization.
For further information, contact
our public affairs office at
(202) 566-2391.
The full report is at:
www.epa.qov/oiq/reports/2014/
20140530-14-P-0272.pdf
Weak Management of a Climate Change
Services Contract Creates Risk EPA Did Not
Receive Services for Which it Paid
What We Found
The EPA lacks a process to verify that
contractor personnel had the skill level to
satisfy contract requirements. We reviewed all
93 task orders for contract EP-W-07-067 and
focused on task order 25. The task order 25
review revealed several problems:
The EPA awards millions of
federal dollars to contractors
every year. It must have
robust oversight and
management controls in
place to prevent waste and
unnecessary spending.
The task order did not list any employees
named in reviewed invoices.
The EPA repeatedly modified the task order to increase funding from an
initial estimate of $310,917 to over $2,000,000.
The contracting officer's representative for task order 25 accepted the
contractor's deliverables without documenting a review of the contractor's
personnel qualifications in comparison with the labor categories invoiced.
The task order was closed without all deliverables being met.
In the contract we reviewed, the official contract file was incomplete, the
determination and findings document did not properly justify the use of a T&M
contract, a government-surveillance plan was not created, and a contracting
officer's representative improperly authorized the disposal of government
property. There was almost no contract management after the contract was
awarded, and the contracting officer had little involvement with contract
administration and delegated most tasks to the contracting officer's
representatives. Given the lack of oversight, contract administration and
documentation, the EPA cannot verify that the contractor provided qualified staff
for the execution of the contract, which created the risk of the agency not
receiving services for which it paid.
Recommendations and Agency Response
We made eight recommendations to the Assistant Administrator for
Administration and Resources Management to improve, implement or address
agency oversight of contractor personnel, subcontractors, activities and invoices
under T&M contracts; best practices for agency personnel when dealing with
T&M contract administration; and questionable charges and improper disposal of
government property for contract EP-W-07-067. The EPA has agreed with some
recommendations and proposed some acceptable corrective actions. However,
information on actions is incomplete and disagreements remain. Therefore, all
recommendations are unresolved. In its final response to this report, the EPA
must provide additional information, as described in this report, to resolve the
report recommendations.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
May 30, 2014
MEMORANDUM
SUBJECT: Weak Management of a Climate Change Services Contract Creates Risk EPA
Did Not Receive Services for Which It Paid
Report No. 14-P-0272
FROM: Arthur A. Elkins Jr.
TO: Craig E. Hooks, Assistant Administrator
Office of Administration and Resources Management
This is our report on the subject evaluation 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 EPA office having primary jurisdiction over the issues evaluated is the Office of Acquisition
Management within the Office of Administration and Resources Management.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this report
within 60 calendar days. You should include planned corrective actions and completion dates for all
unresolved recommendations. Your response will be posted on the OIG's public website, along with our
memorandum commenting on your response. Your response should be provided as an Adobe PDF file
that complies with the accessibility requirements of Section 508 of the Rehabilitation Act of 1973, as
amended. The final response should not contain data that you do not want to be released to the public;
if your response contains such data, you should identify the data for redaction or removal along with
corresponding justification. We will post this report to our website at http://www.epa. gov/oig.
If you or your staff have any questions regarding this report, please contact Carolyn Copper,
Assistant Inspector General for Program Evaluation, at (202) 566-0829 or copper.carolyn@epa.gov;
or Eric Lewis, Director, Special Program Reviews, at (202) 566-2664 or lewis.eric@epa.gov.
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Weak Management of a Climate Change Services Contract
Creates Risk EPA Did Not Receive Services for Which It Paid
14-P-0272
Table of Contents
Purpose 1
Background 1
Rules and Guidance Governing EPA Contracting 1
Time-and-Materials Contracts 1
Responsible Headquarters Office 2
Responsibilities of the Contracting Officer 2
Responsibilities of the Contracting Officer's Representative 3
Verification of Contractor Personnel Qualifications 4
Scope and Methodology 4
Prior Evaluation and Audit Coverage 5
Results 6
EPA Does Not Require Verification of Contractor Personnel
Qualifications for Time-and-Materials Contracts 6
Contractor Personnel Discrepancies Exist at Multiple Levels
of the Contracting Process 7
EPA Cannot Verify Accuracy of Invoiced Charges 7
Task Order 25 Deliverables Were Vaguely Defined,
Outside of Scope and Untimely 10
Other Issues 11
Conclusions 14
Recommendations 15
Agency Comments and OIG Evaluation 15
Status of Recommendations and Potential Monetary Benefits 17
Appendices
A Agency Response to Draft Report 18
B OIG Response to Agency Comments 23
C Distribution 29
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Purpose
The purpose of this review was to assess the controls and processes for managing
a time-and-materials (T&M) contract at the U.S. Environmental Protection Agency
(EPA). The Office of Inspector General (OIG) selected one T&M contract to
determine whether:
The EPA has procedures requiring verification that contractor personnel
have the qualifications and credentials specified in the contract.
The implementation of that verification process is effective.
The EPA received the level of services for which it paid.
Background
A broad range of contract types is available to the government and contractors to
provide needed flexibility in acquiring the large variety and volume of supplies
and services that agencies require. Contract types vary according to:
The degree and timing of the responsibility assumed by the contractor for
the costs of performance.
The amount and nature of the profit incentive offered to the contractor for
achieving or exceeding specified standards or goals.
Rules and Guidance Governing EPA Contracting
The Federal Acquisition Regulation (FAR) is the primary regulation for use by all
federal executive agencies in their acquisition of supplies and services with
appropriated funds. The FAR limits agency acquisition regulations to those
necessary to implement FAR policies and procedures within an agency. The EPA
Acquisition Regulation (EPAAR) implements and supplements the FAR. The
EPA's Contracts Management Manual is an agencywide directive that provides
guidance primarily to program office personnel.
Time-and-Materials Contracts
According to FAR 16.601(b), a T&M contract is one in which supplies or services
are acquired based on: (1) direct-labor hours at specified fixed hourly rates that
include wages, overhead, general and administrative (G&A) expenses, and profit;
and (2) actual cost for materials. The FAR also stipulates in 16.601(c) that a T&M
contract may be used as a contract vehicle only when it is not possible to
accurately estimate the extent or duration of the work, or to anticipate costs with
any reasonable degree of certainty. As such, a T&M contract may be used only
after the contracting officer produces a "determination and findings" document,
which verifies that no other contract type is suitable. As of August 2012, the EPA
had 735 active contracts, of which 142 (about 19 percent) were T&M and labor-
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hour contracts.1 The EPA's contract obligations for all active contracts totaled
over $4.6 billion, of which $1.85 billion (40 percent) were obligated to T&M and
labor-hour contracts.
Responsible Headquarters Office
Within the EPA's Office of Administration and Resources Management (OARM),
the Office of Acquisition Management (OAM) is responsible for policies,
procedures, operations and support of the agency's procurement and contracts
management programfrom contract planning through closeout.
Responsibilities of the Contracting Officer
According to FAR 1.601, a contracting officer is the only person who can enter
into and sign off on contracts on behalf of the government. The contracting officer
also has the authority to enter into, administer and terminate contracts, and to
make related determinations and findings. FAR 1.602-l(b) states:
No contract shall be entered into unless the contracting officer
ensures that all requirements of law, executive orders, regulations,
and all other applicable procedures, including clearances and
approvals, have been met.
The FAR also provides instruction for what contract files should contain,
including the original signed contract, modifications, and any additional
documents that reflect actions taken by the contracting office. The EPA's
Contracts Management Manual requires the contracting officer to maintain the
official contract file through closeout.
FAR 1.602-2 outlines the full weight and scope of a contracting officer's
responsibilities:
Contracting officers are responsible for ensuring 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. In order to perform
these responsibilities, contracting officers should be allowed wide
latitude to exercise business judgment.
Furthermore, FAR 1.102-4(a) states:
... the contracting officer must have the authority to the maximum
extent practicable and consistent with law, to determine the
application of rules, regulations, and policies, on a specific contract.
1 FAR 16.602 defines a labor-hour contract as a variation of a T&M contract, differing only in that materials are not
supplied by the contractor.
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In undertaking this effort, many contracting officers rely on the contribution of
numerous financial, legal and technical experts to assist them.
Responsibilities of the Contracting Officer's Representative
Due to the size and complexity of agency acquisitions, contracting officers
frequently appoint qualified individuals to assist in contract administration,
known as contracting officer's representatives (CORs). The COR is an authorized
representative of the contracting officer who is nominated by the program office;
appointed by the contracting officer; and possesses the necessary knowledge,
skills and abilities to perform COR duties. Although appointed by a contracting
officer, a COR does not have the authority to enter into contractual agreements or
amendments. CORs may perform only those functions appointed to them, and
must not take any action reserved for the contracting officer, such as:
Promise or authorize the contractor to perform work that is in addition to
or outside the scope of the contract, work assignment, or delivery or task
order.
Conduct negotiations or bind the government by making any written or
oral agreements with contractors.
Directly or indirectly change:
o Pricing, cost or fee.
o Scope of the acquisition (i.e., the contract, purchase order, work
assignment, delivery, task order, etc.).
o Delivery schedule or period of performance,
o Labor mix or level of effort,
o Any terms or conditions of the acquisition.
Redelegate or reassign COR authority.
Authorize government-furnished property or its disposition.
Direct the contractor to start work or issue stop-work orders.
The contracting officer may appoint a contract-level COR, as well as a task-order
COR. For each task order, the contracting officer may instruct the task-order COR
to draft the statement of work (SOW) to identify the work that the EPA wants the
contractor to perform, as well as the independent government cost estimate on
how much the work might cost. Once the task order is issued, the task-order COR
may also be tasked with monitoring the contractor's performance to ensure that
the EPA obtains a quality product on time and within cost. Monitoring includes
giving technical direction, reviewing deliverables, and reviewing monthly
progress reports (MPRs) and invoices.
CORs should ensure that the skill level and labor mix provided by the contractor
(i.e., contractor personnel qualifications) meet the specifications in the contract.
According to the EPA's Contracts Management Manual, this is accomplished by
reviewing invoices and MPRs to ensure that the contractor uses the labor skill mix
(i.e., labor categories and hours) necessary to fulfill government requirements.
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Within a labor category, actual wages or salaries vary from one employee to
another, with the more experienced and skilled employees earning higher wages
or salaries. If a contract stipulates the need for labor at a particular experience or
skill level but a contractor uses lower-paid, less-experienced and less-skilled
workers in a labor category, performance may be less efficient or adversely
impacted. Additionally, the contractor will be paid for a level of service not
delivered.
Verification of Contractor Personnel Qualifications
The EPA's regulations and guidance do not specifically require the agency to
verify contractor staff qualifications or provide procedures for doing so. However,
the regulations and guidance do oblige the EPA to make some assessment of
contractor personnel qualifications, obtain resumes of contractor personnel, or
evaluate contractor personnel qualifications. For example:
For T&M contracts, FAR 52.232-7(a) requires hourly rates to be paid for
all labor performed on the contract that meets the labor qualifications
specified in the contract. Under 11.2.3 of the EPA's Contracts
Management Manual, the contracting officer has ultimate responsibility
for invoice processing under individual contracts. However, OAM's
policy of not verifying contractor personnel qualifications and labor rates
is inconsistent with the FAR.
Text from chapter 3 of the EPA's Contracting Officer's Representative
(COR) Basic Training Course Text advises that CORs should consider
contractor personnel qualifications and can ask the contractor to submit
resumes of proposed personnel.
The EPA's Contracts Management Manual, 16.2.5.6(A), states that the
technical component of an offer should include a staffing plan, as well as
resumes of key personnel (if key personnel are identified).2
When deciding to award a contract, FAR 15.305(a)(2)(iii) requires the
agency to evaluate relevant predecessor companies, proposed key
personnel or proposed subcontractors as a selection criterion.
When issuing a contract, EPAAR Section 1552.237-72 requires the
contracting officer to insert a contract clause naming key personnel, and
requires the contractor to notify the contracting officer in the event of key
personnel replacement.
Scope and Methodology
We conducted our review from June 2011 through October 2013, in accordance
with generally accepted government auditing standards issued by the Comptroller
General of the United States. Those standards require that we plan and perform
the review to obtain sufficient, appropriate evidence to provide a reasonable basis
2 Key personnel are individuals who have major contract responsibilities or provide unusual or unique expertise.
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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 review objectives.
We selected one T&M contract for review: EP-W-07-067 ("Technical and
Outreach Support Services for Domestic and Global Climate Initiatives and
Global Climate Change Programs"), which was issued by OARM. We chose to
review this contract due to its dollar value. Based on OAM's active contract list at
the time we began the review, and as of August 2011, $25.10 million has been
obligated and $25.05 million paid.3 The contract may not exceed $30.9 million.
We conducted interviews with relevant EPA staff from OARM, the Office of the
Chief Financial Officer, and the Office of Air and Radiation. This included
interviews with the contracting officer for the contract and the COR for task
order 25. We obtained and reviewed contract documents, including the pre-award
file, award file, all task orders (totaling 93), and 11 MPRs and associated invoices
for task order 25 submitted from October 2010 through September 2011. We
chose task order 25 for further review due to its high cost of over $2 million. We
also reviewed the regulations and agency guidance pertaining to the management
of T&M contracts.
Prior Evaluation and Audit Coverage
The following OIG reports addressed issues related to the scope of our review:
Report No. 09-P-0242, Contractor Invoice Internal Controls Need
Improvement, September 23, 2009.
Report No. 10-R-0113, EPA Should Improve Its Contractor Performance
Evaluation Process for Contractors Receiving Recovery Act Funds,
April 26, 2010.
Report No. 12-P-0320, Policies Neededfor Proper Use and Management
of Cost-Reimbursement Contracts Based on Duncan Hunter Act,
March 6, 2012.
Report No. 12-P-0407, Great Lakes National Program Should Improve
Internal Controls to Ensure Effective Legacy Act Operations,
April 9, 2012.
Report No. 13-P-0208, EPA Should Increase Fixed-Price Contracting for
Remedial Actions, March 28, 2013.
Report No. 13-P-0209, Opportunities for EPA-Wide Improvements
Identified During Review of a Regional Time and Materials Contract,
April 4, 2013.
3 As of September 18, 2013, this was the most current information available from the EPA Compass Data
Warehouse.
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Results
Weak management and oversight of contract EP-W-07-067 put the EPA at risk of
not receiving services for which the agency paid. We found the agency has no
uniform process in place to verify contractor personnel qualifications. Absent a
process, we found contractor personnel discrepancies throughout the contract
files. We also found that the EPA could not verify the accuracy of invoiced
charges.
Analysis of monthly invoice subsamples revealed problems with labor costs,
G&A costs, and subcontractor costs. Task order 25 deliverables were vaguely
defined, outside of scope and untimely. From an initial cost ceiling of $310,917,
task order 25 costs grew to more than $2,000,000, and the period of performance
was extended by almost 3 years. Task order 25 closed without all deliverables
being met, and another task order was opened, in part, to address lingering items.
During the course of our review, we identified problems beyond those associated
with our objectives. We found a lack of proper records management for the
selected contract. The determination and findings document did not justify the use
of a T&M contract. The agency also did not create the quality assurance
surveillance plan required of a T&M contract. Finally, we found that the task
order 25 COR improperly authorized the disposal of government property.
EPA Does Not Require Verification of Contractor Personnel
Qualifications for Time-and-Materials Contracts
We found that the agency has no uniform process in place to verify contractor
personnel qualifications. OAM management told us the contractor is responsible
for ensuring that all staff, other than key personnel, are qualified to perform work
under the contract. Rather than verifying contractor qualifications, EPA staff
stated they relied on personal judgment and information contained in the contract.
A contracting officer we interviewed told us that verifying the qualifications of
contracting staff billed under the contract was not required; it was the contractor's
responsibility to find qualified personnel for a given contract. The COR for task
order 25 also told us that verifying the qualifications of contractor staff was not
required because the field was small and there was familiarity with those working
in the field.4
4 OIG Report No. 13-P-0209 recommended that OAM require task order CORs to evaluate the qualifications of
contractor key staff proposed by the contractor in the work plan, and to review qualifications for samples of non-key
staff billed on invoices. This recommendation has been resolved with OAM. Therefore, we did not make a similar
recommendation in this report.
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Contractor Personnel Discrepancies Exist at Multiple Levels of the
Contracting Process
We found that the documentation of contractor and related personnel
qualifications was insufficient for both contract-level modifications and the
contract-level proposal. The contract formally named only two contractor
employeesthe program manager and the deputy program manageras key
personnel, while the contract and contract-level modifications approved the use of
23 subcontractors and 31 consultants. In addition, the contractor's proposal named
nearly 200 employees, but only 111 employee resumes were included. OAM
management confirmed that it only requires key personnel to be named.
We examined the 93 task orders issued under the contract and found additional
personnel issues. For example:
We were unable to determine which contractor employees managed 23 of
the 93 task orders because the information was not contained in task order
files.
The contract-level documentation did not name 69 percent of the
employees proposed for task-order work, including six managers;
46 percent of all consultants and subcontractors named in the task orders
were not named and approved in either the contract or contract-level
modifications.
We could not properly account for many contractor employees named in
the task orders. Of the 178 employees named in task-order files, 46 lacked
labor classifications. Task orders provided some sort of description for
most named employees, but we were unable to find resumes for 158 of
178 employees. Five employees named in the task orders lacked
descriptions or resumes.
We also noted problems involving contractor personnel in our focused review of
task order 25 and invoices. Task order 25 documentation did not name any of the
23 employees billed in the invoices. Of these 23 employees, 9 accounted for
70 labor hours and $10,169 charged, but none of the 9 employees were named
anywhere in the contract documentation. In addition, the contractor charged
2,462 labor hours and $370,765 to labor categories under a subcontractor not
given subcontracting consent by EPA.
EPA Cannot Verify Accuracy of Invoiced Charges
We found invoice and MPR reviews lacking at the contracting officer and COR
levels. The contracting officer told us that invoice review was conducted solely by
the CORs. The COR for task order 25 did not document his review of MPRs,
invoices or deliverables. Analysis of monthly invoice subsamples revealed
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problems with labor, G&A and subcontractor costs. Overall, we found that the
contracting officer and the COR were unable to track invoiced costs against
activities reported in MPRs. OAM management confirmed that it does not require
contracting personnel to verify invoices. Specifically, it was the contractor's
responsibility to ensure that the invoices were correct.
Labor Costs
Review of task order 25 labor invoices disclosed the following
questionable costs:
The task order did not list any of the 23 employees named in the
invoices, and nine employees (accounting for 70 labor hours and
$10,169 charged) were not named elsewhere in the contract file.
The contractor charged 2,462 labor hours and $370,765 to labor
categories under a subcontractor not given subcontracting consent
by EPA, which accounted for 86 percent of labor cost.
In two instances, contractor employees charged for labor at a
higher-paying labor category than the category listed for the
employee in the contract file. For two other contractor employees,
labor rates inexplicably increased between monthly invoices. There
is no documentation to show that the contracting officer approved
these increases.
When we noted that work was billed by a subcontractor whose name never
appeared in the approved subcontractor list, the contracting officer and
COR both explained that the subcontractor had been previously known by
another name that was listed. When we asked the contracting officer about
verification of the subcontractor name change, we were provided with a
2010 letter from the subcontractor giving notice of a name change.
However, the previous name did not match the name of the approved
subcontractor in the contract. No name change was documented in a
contract modification. When we asked why there was no modification to
explain the name change, the COR said that as long as he knew the
subcontractor the lack of documentation did not concern him.
The contracting officer for the selected contract had little involvement in
contract administration and delegated most duties, including invoice
review, to the program office CORs. The COR for task order 25 relied on
informal methods to determine whether the EPA was properly invoiced
and contract specifications for deliverables were met. However, the COR
did not document the review of invoices or the contractor's monthly
progress. Consequently, the effectiveness of the COR's review cannot be
verified.
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In the absence of consistent documentation on the contractor's monthly
progress and the quality of deliverables, the EPA is at risk of not knowing
whether: (1) contractor performance was adequate, (2) the contractor was
performing work within an estimated cost, or (3) properly qualified
individuals were performing the work.
In the event another COR has to take over this task order, there is no
documentation of past performance with which the new COR can verify
the qualifications of contractor personnel or the quality of the deliverables.
G&A Costs
We found the agency vulnerable to being double charged for G&A
expenses. The contract language not only states that G&A expenses
should be calculated into established labor rates, the language also
establishes that "G&A/material-handling expenses" for other direct costs
may also be applied. The additional G&A expenses listed in the invoices
are in a separate section and unrelated to either the labor hour or the other
direct costs sections. Furthermore, these charges are not explained
elsewhere in the MPRs or invoices. When asked, the contracting officer
was unable to clarify these issues. Based on the invoices we sampled for
task order 25, we found $5,590 in questionable G&A expenses.
Subcontractor Costs
The lack of proper oversight created vulnerability to subcontractor
overcharges. The contract states that invoiced charges for subcontracts
shall be further detailed in a supporting schedule that shows major cost
elements for each subcontract. However, we were unable to locate any
such detail in the invoices. In addition, two of the three subcontractors
named in the MPRs were not listed in contract documentation as approved
subcontractors. Based on the invoices we sampled for task order 25, we
found $163,969 in questionable subcontractor charges.
EPA Does Not Require the Contractor to Justify Lagging Costs
We could not track invoiced costs against activities reported in
corresponding MPRs. For subcontractor labor, numerical labor hour
estimates were not supplied alongside the work summaries from MPR
subcontractors. When supplied for contractor labor, these estimates were
exceeded by invoiced amounts. Specifically, tracking expenses was
confounded by the accumulation of "lagging costs," which were defined
by the contracting officer as costs that have been incurred during the
billing period associated with the invoice but have not yet been included in
the invoice.
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However, we found repeated instances where invoices would partially
cover expenses from previous reporting periods without stating to which
activities or reporting periods the invoiced quantities applied. As a result,
it was not possible to match any invoiced charge with any specific activity
described in a current or previous MPRmaking it difficult to determine
if the charges are legitimate.
The EPA's contracting personnel were unable to adequately explain these
issues. The COR for task order 25 said lagging costs were tracked
informally (i.e., the COR used professional knowledge of material costs,
and discerned the quality of deliverables and matched them to the labor
categories billed). However, the COR could not provide documentation to
demonstrate the accuracy of this method. When asked, the contracting
officer showed a lack of understanding with respect to how lagging costs
were actually tracked.
Task Order 25 Deliverables Were Vaguely Defined, Outside of Scope
and Untimely
The task order 25 file did not clearly describe expected deliverables. The
deliverables were delayed, subject to vague timelines, and at times progress
toward the completion of the deliverables was inadequately explained. The EPA
repeatedly modified task order 25 to increase funding. From an initial cost ceiling
of $310,917, task order 25 costs grew to over $2,000,000, and the period of
performance was extended by almost 3 years. Task order 25 closed without all
deliverables being met, and another task order was opened, in part, to address
lingering items.
We found that task order 25 paperwork was too disorganized to clearly determine
task order deliverables. The agency never specified which of the three SOWs
present in the task order 25 file was being followed (each SOW specified different
deliverables). When the EPA issued its proposal request for task order 25, the
agency included a preliminary SOW for prospective contractors. The contractor
also submitted a more detailed, tentative SOW as part of its proposal to win task
order 25. The EPA's official task order documentation makes no mention of the
contractor's SOW, but includes a copy of the EPA's preliminary SOW. In
addition, we found a revised contractor-prepared SOW with the paperwork for
task order modification 2, but the EPA modification documentation again failed to
reference this revision.
The COR for task order 25 did not ensure that contractor deliverables were
consistent with the deliverables listed in the SOWs. For instance, without a
contracting officer's endorsement, the COR approved the addition of two
deliverables outside of the SOWs. The COR also approved the removal of two
deliverables without a contracting officer's endorsement. There was no
14-P-0272
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documented contracting officer's approval for either of these actions in the task
order 25 file. By authorizing the completion of deliverables not listed in the
SOWs, and by agreeing to cancel deliverables that were in fact listed in the
SOWs, the COR made unauthorized commitments.
Deliverables were plagued with delays and uncertain timelines. In the MPRs
made available to us, we found that four draft subtask-level deliverables were at
least 18 months late. The contractor failed to supply delivery dates for six other
draft deliverables within the same subtask. Revised and final deliverables within
this subtask were due within 2 weeks of receiving comments. However, these
deadlines are not discernible because the MPRs do not include the dates the
comments were received. As of the projected completion date for task order 25,
one final deliverable had not been received.
We found that deliverables associated with another subtask could not be clearly
tracked with the information we were given. Numerous subtasks described in the
MPRs were never attributed to their applicable SOW task or subtask. In addition,
there was nothing in the MPRs to suggest that another task had been completed or
any of the deliverables supplied.
The contracting officer for the selected contract did not properly administer the
contract and oversee the work being conducted by the COR. The contracting officer
seemed unaware of the actions taken by the COR for task order 25, and explained
that the Office of Air and Radiation preferred that contracting officers not contact
CORs directly but instead communicate through an Office of Air and Radiation
contract-level COR. Although the selected contract was in its final few months, the
contracting officer had not met the task order 25 COR in person at the time of our
review, even though both individuals were located in Washington, D.C.
Other Issues
During the course of our review, we identified problems beyond those associated
with our objectives.
Contract Files Were Incomplete
We found a lack of proper records management for the selected contract.
The maintenance of complete and accurate project files is essential for
managing all contractor work. The FAR provides instruction for what
contract files should contain. The EPA's Contract Management Manual
lists contracting officer responsibilities, which include maintaining the
official contract files through contract closeout. FAR 4.801(b) states that
the documentation in files shall be sufficient to constitute a complete
history of the transaction for the purpose of:
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Providing a complete background as a basis for informed decisions
at each step in the acquisition process.
Supporting actions taken.
Providing information for reviews and investigations.
Furnishing essential facts in the event of litigation or congressional
inquiries.
FAR 4.803(a) and 4.803(b) provide examples of records normally
contained in contract files. These records include a copy of the contract
and all modifications, performance and payment documents, documents
pertaining to actions taken by the contracting officer, quality-assurance
documents, and cross-references to other pertinent documents filed
elsewhere.
The contracting officer was unable to locate or produce copies of the
following documentation:
The original, signed contract.
Signed, contract-level modifications.
MPRs and associated invoices for the years prior to the contracting
officer's assignment to the contract.
The MPR and associated invoice for April 2010 (part of the year's
worth of MPRs and associated invoices that we requested for
review), during which the contracting officer was assigned to this
contract.
When the contract file is incomplete, the ability to make informed
decisions about a contract is compromised, increasing the risk of waste
and fraud. For example, without MPRs, the EPA cannot verify whether the
$25.05 million paid was appropriate. Similarly, the EPA cannot check
approved subcontractor identities and subcontracting procedures against
those proposed for task orders without a copy of the contract file and
modifications.
Determination and Findings Document Did Not Justify
Use of T&M Contract
A determination and findings document is necessary to use a T&M
contract. However, the determination and findings lacked elements
required to justify the use of a T&M contract.
FAR 16.601(d)(1) states that a T&M contract may be used only if the
contracting officer prepares a determination and findings that says no
other contract type is suitable. However, the determination and findings
document made no mention of T&M and concluded that the contract be
awarded on a fixed rate, indefinite-delivery/indefinite-quantity basis.
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Moreover, the determination and findings must be approved by the head of
the contracting activity when the contract base period (plus any optional
periods) exceeds 3 years, which was the case with the selected contract.
The "head of the contracting activity" is a role assigned to the director of
OAM in Section 1.2.4(D) of the EPA's Contract Management Manual. In
the case of the selected contract, the determination and findings document
was never approved by the head of contracting, but by a previous
contracting officer.
In addition, FAR 12.207(c)(3) states that if an indefinite-delivery contract
only allows for the issuance of orders on a T&M or labor-hour basis, the
determination and findings must be executed to support the basic contract
and: (1) explain why providing for an alternative firm, fixed price or fixed
price with an economic price adjustment pricing structure is not
practicable; and (2) be approved one level above the contracting officer.
The EPA never addressed these aspects.
EPA staff said T&M was necessary for this contract because contract task
orders contained too many unknown and unforeseen factors. The OIG
agrees that firm, fixed-price contracts lend themselves to a well-defined
scope of work and that not all tasks can be firm, fixed price. However, we
do not agree with the EPA that the contract did not lend itself to firm,
fixed pricing, given how many years the same services have been
performed. The lack of proper contract planning and oversight on the part
of OAM and the program office resulted in a determination and findings
that inadequately justified the use of the T&M contract. Therefore, the
EPA is not taking the required steps to show that it is using fixed-price
contracting to the maximum extent possible.
Government Surveillance Plan Was Never Created
The EPA did not create a government quality assurance surveillance plan
for this contract although the FAR requires one for T&M contracts.
When asked why there was no surveillance plan, the contracting officer
responded that the contract clauses constitute the surveillance plan.
We believe the contract clause does not provide surveillance, but rather
documents contract requirements. In the absence of a government
surveillance plan, there is a lack of assurance that costs were fair and
reasonable, that work was performed to government standards, or that
deliverables described in the SOWs were delivered by the contractor as
agreed to in the contract.
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Task Order 25 COR Improperly Authorized Disposal of
Government Property
The task order 25 COR improperly authorized the disposal of government
property. At the conclusion of a project, the COR authorized the foreign
parties using the supplies to keep or sell property too expensive to ship
back to the United States or deemed beyond acceptable re-use. We found
no documented inventory of contractor-purchased materials or records
showing disposal actions. The contracting officer did not know the COR
had given away the property until the contractor relayed the information.
FAR 45.402(b) establishes that, under a T&M contract, the government
acquires title to all property for which the contractor is entitled to
reimbursement as a direct item of cost under the contract. Under EPAAR
Section 1552.245-70(b)(10), the contractor is required to update all
property records to show disposal action. A corresponding clause was
found in the contract as well.
CORs may perform only those functions appointed to them and must not
take any action reserved for the contracting officersuch as the disposal
of government property. The COR appointment memo, signed by the COR
for task order 25, clearly forbids the COR from authorizing delivery or
disposition of government-furnished property. The contracting officer for
the selected contract did not properly administer the contract and oversee
the work being conducted by the COR.
Conclusions
For the T&M contract reviewed, the EPA cannot determine the accuracy of
invoiced charges. The EPA did not properly keep contract files, and had no
formal process to ensure the integrity of contract files when they were transferred
between contracting officers. In addition, OAM did not properly oversee aspects
of the contract's pre-award phase, improperly justifying the use of a T&M
contract and failing to include the FAR-required government quality assurance
surveillance plan. The EPA conducted almost no contract management after the
contract was awarded because the contracting officer had little involvement in
contract administration, choosing instead to delegate most tasks to the CORs.
Given the lack of oversight, contract administration and documentation, the EPA
cannot verify if the contractor provided qualified staff for the execution of the
selected contract.
Based on the small number of invoices we sampled for task order 25, we found
questionable costs, including G&A expenses totaling $5,590 and subcontractor
charges totaling $163,969.
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Recommendations
We recommend that the Assistant Administrator for Administration and
Resources Management:
1. Require that activities, personnel and subcontractors proposed by
contractors at the contract and task order levels be officially endorsed in
task order documentation.
2. Require that changes in contractor personnel and subcontractors at the
contract and task order levels are officially established by modification.
3. Require that CORs document a thorough and consistent review of work
plans, MPRs, invoices, receipts and deliverables.
4. Beginning with the questionable G&A expenses ($5,590) and
subcontractor charges ($163,969) in the invoices we sampled, conduct a
review of all invoices from contract EP-W-07-067 to determine if the EPA
overpaid for G&A costs, other direct costs, lagging costs and
subcontracting costs.
5. Develop and implement procedures to maintain a complete contract file
when transferred between contracting officers.
6. Require that T&M contracts abide by FAR requirements, such as having a
determination and findings document and a government quality assurance
surveillance plan.
7. Conduct a contract-wide review of contract EP-W-07-067 to determine if
government property was improperly disposed.
8. Develop and implement new or additional training for EPA acquisition
personnel to communicate new requirements or expectations that arise
from the recommendations and findings in this report.
Agency Comments and OIG Evaluation
The action official concurred with recommendations 3, 4, 5, 6, 7 and 8 but did not
provide a position (agreement or disagreement) for recommendations 1 or 2. We
consider all eight recommendations to be unresolved. For recommendations 4
and 7, the agency did not supply an estimated completion date for its planned
corrective actions. Recommendations 1, 2, 3, 5, 6 and 8 require corrective action
revisions along with estimated completion dates once acceptable corrective
actions are identified. The agency's comments on the draft report are in
appendix A and the OIG's detailed responses to the agency's draft report
comments are in appendix B.
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Prior to issuing this final report, we met with OARM staff and officials to discuss
their draft report comments, communicate the OIG's information needs, and
attempt to reach resolution on the recommendations. However, OARM could not
provide the OIG the additional information without repeated extensions, leading
to delays in issuing our report. The agency needs to address the unresolved
recommendations in its response to the final report.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed
Amount
Ag reed-To
Amount
15 Require that activities, personnel and
subcontractors proposed by contractors at the
contract and task order levels be officially endorsed
in task order documentation.
Assistant Administrator for
Administration and
Resources Management
15 Require that changes in contractor personnel and
subcontractors at the contract and task order levels
are officially established by modification.
15 Require that CORs document a thorough and
consistent review of work plans, MPRs, invoices,
receipts and deliverables.
15 Beginning with the questionable G&A expenses
($5,590) and subcontractor charges ($163,969) in
the invoices we sampled, conduct a review of all
invoices from contract EP-W-07-067 to determine if
the EPA overpaid for G&A costs, other direct costs,
lagging costs and subcontracting costs.
15 Develop and implement procedures to maintain a
complete contract file when transferred between
contracting officers.
15 Require that T&M contracts abide by FAR
requirements, such as having a determination and
findings document and a government quality
assurance surveillance plan.
15 Conduct a contract-wide review of contract
EP-W-07-067 to determine if government property
was improperly disposed.
15 Develop and implement new or additional training
for EPA acquisition personnel to communicate new
requirements or expectations that arise from the
recommendations and findings in this report.
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for
Administration and
Resources Management
$169
0 = Recommendation is open with agreed-to corrective actions pending.
C = Recommendation is closed with all agreed-to actions completed.
U = Recommendation is unresolved with resolution efforts in progress.
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Appendix A
Agency Response to Draft Report
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
DEC 9 2013
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Response to Draft Audit Report OPE-FY 11 -0013: Weak Contract Management
and Oversight Put EPA at Risk of Not Receiving Services for Which the Agency
Paid
OARM has reviewed draft OIG audit OPE-FY11-0013, and provides the following response to
audit findings and recommendations.
Recommendation 1: Require that activities, personnel and subcontractors proposed by
contractors at the contract and task order levels be officially endorsed in task order
documentation.
Recommendation 2: Require that changes in contractor personnel and subcontractors at the
contract and task order levels are officially established by modification.
OARM Response:
OARM proposes the following alternative corrective actions to resolve this recommendation.
The OIG's findings and recommendations do not reflect contract terms and conditions. The OIG
references a Federal Acquisition Regulation clause (52.232-7 "Payments Under Time-and-
Materials and Labor-Hour-Contracts") not used in the audited contract. EPAAR 1552.232-73
"Payments - fixed rate services contract" governed the invoice review and approval process in
the contract.
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FROM: Craig E. Hooks, Assistant Administrator
TO:
Carolyn Copper, Assistant Inspector General
Office of Program Evaluation
-------
In spite of this disconnect between the contract terms and conditions and the audit, the EPA is
assessing policies and clauses related to EPAAR 1552.232-73 for consistency with FAR policies
and related clauses governing time-and-materials and labor-hour contracts. This assessment will
ensure consistency with the FAR, including the requirements for verifying personnel
qualifications which may be prescribed in contracts, during the invoice review and approval
process.
Additionally, as acknowledged on other recent OIG audits of fixed-rate contracts, EPA is
developing performance-based contracting guidance and associated training. This guidance will
prescribe that labor categories be defined by duties and responsibilities rather than by personnel
qualifications, which will mitigate the circumstances associated with this finding.
Finally, for key personnel identified in accordance with contract terms and conditions, pursuant
to EPAAR clause 1552.237-72 "Key Personnel" individual staff qualifications are already
verified prior to award, and also in instances where the contractor may replace staff.
Based upon the above explanation, OARM offers these alternative corrective actions to resolve
this recommendation.
Recommendation 3: Require that Contracting Officer Representatives document a thorough and
consistent review of work plans, Minimal Program Requirements, invoices, receipts and
deliverables.
OARM Response:
OARM agrees and has already implemented the following policies which address the
circumstances supporting this recommendation. These policies ensure agency CORs consider
their contract management responsibilities (which includes payment) as part of the acquisition
planning process, and receive training on the proper review and disposition of invoices.
1. OARM implemented Interim Policy Notice (IPN) 12-03 "Acquisition Planning" on October
14, 2013, at http://oamintra.epa.gov/node/8?q=node/158. Although acquisition planning is a pre-
award activity, decisions made in the acquisition planning phase may either hinder or facilitate
post-award contract management activities. A critical goal of Interim Policy Notice 12-03 is to
ensure proper acquisition planning occurs in order to result in well defined requirements that will
enhance the agency's ability to receive mission critical goods and services, and ensure those
goods and services meet contract performance requirements. In the context of audit findings, IPN
12-03 includes a discussion on service contracting.
2. Additionally, on September 27, 2013, OAM issued IPN 13-03 "EPA Federal Acquisition
Certification for Contracting Officer's Representatives Three-Tiered Program" at
http://oamintra.epa.gov/node/8?q=node/158. This policy establishes EPA's COR certification
and training requirements beginning in October 2013, and contains a requirement for CORs to
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take four Continuous Learning Points in the financial management of contracts, to either obtain
or maintain certification. This class is designed to assist CORs on the financial management of
contracts by providing basic knowledge and advice for managing contract funds during the
invoice payment and close-out processes.
3. Lastly, OARM has begun developing a Contract Management Plan Guide which is a logical
follow-on to the above-described acquisition planning policy, and will establish processes and
procedures in support of post-award contract administration activities.
OARM will use the Self-Assessment and Peer Review components of the Balanced Scorecard
Performance Measurement and Management Program to monitor implementation and
compliance with these policies, and believes these corrective actions fully satisfy the above
recommendation.
Recommendation 4: Beginning with the questionable G&A expenses ($5,590) and
subcontractor charges ($163,969) in the invoices we sampled, conduct a review of all invoices
from contract EP-W-07-067 to determine if the EPA overpaid for G&A costs, other direct costs,
lagging costs, and subcontracting costs.
OARM Response:
OARM agrees with this recommendation, and will initiate an internal financial management
review of contract EP-W-07-067, and take action based upon the review results. The FMR
objectives are attached. OARM believes that this corrective action fully satisfies the above
recommendations.
Recommendation 5: Develop and implement procedures to maintain a complete contract file
when transferred between contracting officers.
Recommendation 6: Require that Time and Materials contracts abide by FAR requirements,
such as having a determination and findings document and a government quality assurance
surveillance plan.
Recommendation 8: Develop and implement new or additional training for EPA acquisition
personnel to communicate new requirements or expectations that arise from the
recommendations and findings in this report.
OARM Response:
OARM agrees and has already implemented the following policies which address the
circumstances supporting these recommendations.
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With regard to contract file documentation, OARM has self-identified inadequate file
documentation as a recurring finding under the BSC PMMP Peer Review program, and has
directed a number of corrective actions. Updated policies include excerpts from the OAM
Acquisition Handbook "Update to Acquisition Handbook 4.1 Reviews, Concurrences, and
Checklists" (entire document at http://oamintra.epa.gov/node/47. and updated via IPN 12-03
"Acquisition Planning"), which contain contract checklists of documents to be filed in the
official contract file.
With regard to ensuring T&M contracts are supported by a determination and findings and
quality assurance surveillance plan, again the above described policies address both these
requirements. The OAM Acquisition Handbook 4.1 update includes a level above review for all
actions (item 2), and Service Center Manager approval for D&F's in support of T&M contracts
(item 23).
Additionally, IPN 12-03 "Acquisition Planning", includes guidance on contract surveillance
under service contracts. Lastly, OARM has begun developing a Contract Management Plan
Guide which is a logical follow-on to the above-described acquisition planning policy, and will
establish procedures in support of post-award contract administration activities, including
contract surveillance.
With regard to communicating and training acquisition personnel on these policies, OAM has
already been using the self-assessment and peer review components of the BSC PMMP to
identify knowledge and training weaknesses among agency staff, and has implemented solutions
(training, policy) to address those shortcomings. OARM will continue to monitor and ensure
compliance with these policies through the self-assessment and peer review components of the
BSC PMMP.
Based upon the above discussion, OARM believes these corrective actions fully satisfy the above
recommendation.
Recommendation 7: Conduct a contract-wide review of contract EP-W-07-067 to determine if
government property was improperly disposed.
OARM Response:
OARM agrees with this recommendation, and will work with OARM /FMSD to investigate
property disposition on the above contract, and take action based upon review results.
Accordingly, OAM believes this corrective action fully satisfies the above recommendation.
Please contact John Bashista, director, Office of Acquisition Management at (202) 564-4310 if
you have any questions regarding this response.
Attachment
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cc:
Eric Lewis
Byron Shumate
Nanci Gelb
John Bashista
Lisa Maass
John Showman
Steve Blankenship
Brandon McDowell
Marian P. Cooper
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Appendix B
OIG Response to Agency Comments
To address the agency's comments, we broke its responses to the various recommendations into
multiple parts. A breakdown of the agency comments and our responses to those comments follow.
Recommendation #1: Require that activities, personnel and subcontractors proposed by
contractors at the contract and task order levels be officially endorsed in task order documentation.
Agency Response: OARM proposes the following alternative corrective actions to resolve this
recommendation:
1.1. "The EPA is assessing policies and clauses related to EPAAR 1552.232-73 for consistency with
FAR policies and related clauses governing time-and-materials and labor-hour contracts. This
assessment will ensure consistency with the FAR, including the requirements for verifying personnel
qualifications which may be prescribed in contracts, during the invoice review and approval process."
1.2. "Additionally, as acknowledged on other recent OIG audits of fixed-rate contracts, EPA is
developing performance-based contracting guidance and associated training. This guidance will
prescribe that labor categories be defined by duties and responsibilities rather than by personnel
qualifications, which will ensure consistency with the FAR, including the requirements for verifying
personnel qualifications which will mitigate the circumstances associated with this finding."
1.3. "Finally, for key personnel identified in accordance with contract terms and conditions, pursuant
to EPAAR clause 1552.237-72 "Key Personnel" individual staff qualifications are already verified
prior to award, and also in instances where the contractor may replace staff."
OIG Evaluation for Recommendation 1: The recommendation is unresolved.
Based on the information provided, it is not clear how the information addresses the intent of the
recommendation:
Proposed Action 1.1: The OIG agrees that the agency should require verification of personnel
qualifications, including during the invoice review and approval process. However, it is not clear
how the proposed consistency review between the FAR and EPAAR addresses our finding, as
neither require task order awards to clearly identify activities, personnel and subcontractors.
Proposed Action 1.2: It is unclear how developing performance-based contracting guidance will
mitigate the circumstances associated with this finding. Contract EP-W-07-067 is a T&M contract,
not a performance-based contract.
Proposed Action 1.3: The OIG agrees that EPAAR 1552.237-72 provides a mechanism for
replacement and establishment of key personnel at the contract level. However, it does not address
key personnel, other contractor personnel or subcontractors at the task order level.
In its response to the final report, the agency needs to include the following:
A statement of agreement or disagreement with the recommendation.
Corrective actions which are responsive to the recommendation or clarification as to why the
proposed actions are responsive.
An estimated completion date for any planned corrective actions.
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Recommendation #2: Require that changes in contractor personnel and subcontractors at the
contract and task order levels are officially established by modification.
Agency Response: QARM proposes the following alternative corrective actions to resolve this
recommendation:
2.1. "The EPA is assessing policies and clauses related to EPAAR 1552.232-73 for consistency with
FAR policies and related clauses governing time-and-materials and labor-hour contracts. This
assessment will ensure consistency with the FAR, including the requirements for verifying personnel
qualifications which may be prescribed in contracts, during the invoice review and approval process."
2.2. "Additionally, as acknowledged on other recent OIG audits of fixed-rate contracts, EPA is
developing performance-based contracting guidance and associated training. This guidance will
prescribe that labor categories be defined by duties and responsibilities rather than by personnel
qualifications, which will ensure consistency with the FAR, including the requirements for verifying
personnel qualifications, which will mitigate the circumstances associated with this finding."
2.3. "Finally, for key personnel identified in accordance with contract terms and conditions, pursuant
to EPAAR clause 1552.237-72 "Key Personnel" individual staff qualifications are already verified
prior to award, and also in instances where the contractor may replace staff."
OIG Evaluation for Recommendation 2: The recommendation is unresolved.
Based on the information provided, it is not clear how the information addresses the intent of the
recommendation:
Proposed Action 2.1: The OIG agrees that the agency should require verification of personnel
qualifications, including during the invoice review and approval process. However, it is not clear
how the proposed consistency review between the FAR and EPAAR addresses our finding that
personnel and subcontractors used in task orders were difficult to discern.
Proposed Action 2.2: It is unclear how developing performance-based contracting guidance will
mitigate the circumstances associated with this finding. Contract EP-W-07-067 is a T&M contract,
not a performance-based contract.
Proposed Action 2.3: The OIG agrees that EPAAR 1552.237-72 provides a mechanism for
replacement and establishment of key personnel at the contract level. However, it does not address
(1) contractor personnel or subcontractors at the contract level; or (2) key personnel, other
contractor personnel or subcontractors at the task order level.
In response to the final report, the agency needs to include the following:
A statement of agreement or disagreement with the recommendation.
Corrective actions which are responsive to the recommendation or clarification as to why the
proposed actions are responsive.
An estimated completion date for any planned corrective actions.
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Recommendation #3: Require that CORs document a thorough and consistent review of work
plans, MPRs, invoices, receipts and deliverables.
Agency Response: "OARM agrees and has already implemented the following policies which
address the circumstances supporting this recommendation. These policies ensure agency CORs
consider their contract management responsibilities (which includes payment) as part of the
acquisition planning process, and receive training on the proper review and disposition of invoices."
3.1. "OARM implemented Interim Policy Notice (IPN) 12-03 "Acquisition Planning" on October 14,
2013, at http://oamintra.epa.qov/node/8?q=node/158. Although acquisition planning is a pre-award
activity, decisions made in the acquisition planning phase may either hinder or facilitate post-award
contract management activities. A critical goal of Interim Policy Notice 12-03 is to ensure proper
acquisition planning occurs in order to result in well defined requirements that will enhance the
agency's ability to receive mission critical goods and services, and ensure those goods and services
meet contract performance requirements. In the context of audit findings, IPN 12-03 includes a
discussion on service contracting."
3.2. "Additionally, on September 27, 2013, OAM issued IPN 13-03 "EPA Federal Acquisition
Certification for Contracting Officer's Representatives Three-Tiered Program" at
http://oamintra.epa.qov/node/8?q=node/158. This policy establishes EPA's COR certification and
training requirements beginning in October 2013, and contains a requirement for CORs to take four
Continuous Learning Points in the financial management of contracts, to either obtain or maintain
certification. This class is designed to assist CORs on the financial management of contracts by
providing basic knowledge and advice for managing contract funds during the invoice payment and
close-out processes."
3.3. "Lastly, OARM has begun developing a Contract Management Plan Guide which is a logical
follow-on to the above-described acquisition planning policy, and will establish processes and
procedures in support of post-award contract administration activities."
3.4. "OARM will use the Self-Assessment and Peer Review components of the Balanced Scorecard
Performance Measurement and Management Program to monitor implementation and compliance
with these policies."
OIG Evaluation for Recommendation 3: The recommendation is unresolved.
Based on the information provided, it is not clear how the information addresses the intent of the
recommendation:
Proposed Action 3.1: The OIG reviewed IPN 12-03 and could find nothing relevant to
documentation of COR reviews. Further, the OIG found nothing in the discussion on service
contracting in IPN 12-03 Section L relevant to the context of audit findings.
Proposed Action 3.2: The OIG reviewed IPN 13-03 and found mandatory coursework for
instructing CORs in financial management. This is not the same as requiring them to document
their reviews.
Proposed Action 3.3: The OIG is supportive of the formulation of a Contract Management Plan
Guide. However, the assurance that it will establish processes and procedures in support of post-
award contract administration activities, as described, does not provide sufficient detail to address
COR documentation of reviews.
Proposed Action 3.4: We appreciate OARM's commitment to following up on its implementation
and compliance with the Balanced Scorecard Performance Measurement and Management
Program. However, as discussed above, the proposed actions do not meet the intent of the
recommendation.
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In response to the final report, the agency needs to include the following:
Corrective actions which are responsive to the recommendation or clarification as to why the
proposed actions are responsive.
An estimated completion date for any planned corrective actions.
In the recommendation, and in the context of the report, the OIG uses MPRs as the abbreviation for
monthly progress reports. However, in the agency's response, it refers to MPRs as minimal program
requirements. The agency needs to take note of this, as it could affect its interpretation of the
recommendation.
Recommendation #4: Beginning with the questionable G&A expenses ($5,590) and subcontractor
charges ($163,969) in the invoices we sampled, conduct a review of all invoices from contract EP-W-
07-067 to determine if the EPA overpaid for G&A costs, other direct costs, lagging costs, and
subcontracting costs.
Agency Response:
"OARM agrees with this recommendation, and will initiate an internal financial management review
of contract EP-W-07-067, and take action based upon the review results."
OIG Evaluation for Recommendation 4: The corrective action is acceptable, but the
recommendation is unresolved until an estimated completion date is provided.
Recommendation #5: Develop and implement procedures to maintain a complete contract file
when transferred between contracting officers.
Agency Response:
"OARM agrees and has already implemented the following which address the circumstances
supporting this recommendation."
"With regard to contract file documentation, OARM has self-identified inadequate file documentation
as a recurring finding under the BSC PMMP Peer Review program, and has directed a number of
corrective actions. Updated policies include excerpts from the OAM Acquisition Handbook "Update
to Acquisition Handbook 4.1 Reviews, Concurrences, and Checklists" (entire document at
http://oamintra.epa.gov/node/47, and updated via IPN 12-03 "Acquisition Planning"), which contain
contract checklists of documents to be filed in the official contract file."
OIG Evaluation for Recommendation 5: The recommendation is unresolved.
The OIG reviewed the updates to Acquisition Handbook 4.1 and was unable to locate any requirement
specific to the recommendation to develop and implement procedures to maintain a complete contract
file when transferred between contracting officers.
In its response to the final report, the agency needs to include the following:
Corrective actions which are responsive to the recommendation or clarification as to why the
proposed actions are responsive.
An estimated completion date for any planned corrective actions.
A separate narrative for each recommendation. The agency used one narrative to respond to
recommendations 5, 6 and 8, and it is unclear which components of the proposed actions apply to
which recommendations.
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Recommendation #6: Require that T&M contracts abide by FAR requirements, such as having a
determination and findings document and a government quality assurance surveillance plan.
Agency Response: "OARM agrees and has already implemented the following which address the
circumstances supporting this recommendation."
6.1. "With regard to ensuring T&M contracts are supported by a determination and findings and
quality assurance surveillance plan, again the above described policies (in previous
recommendations) address both these requirements. The OAM Acquisition Handbook 4.1 update
includes a level above review for all actions (item 2), and Service Center Manager approval for
D&F's in support of T&M contracts (item 23)."
6.2. "Additionally, IPN 12-03 "Acquisition Planning", includes guidance on contract surveillance
under service contracts."
6.3. "Lastly, OARM has begun developing a Contract Management Plan Guide which is a logical
follow-on to the above-described acquisition planning policy, and will establish procedures in support
of post-award contract administration activities, including contract surveillance."
OIG Evaluation for Recommendation 6: The recommendation is unresolved.
Based on the information provided, it is not clear how the information addresses the intent of the
recommendation:
Proposed Action 6.1: Though the Assignment Handbook update requires Service Center Manager
approval for a determinations and findings document in support of T&M contracts, the FAR (i.e.,
FAR 16.601(d)) requires a T&M determinations and findings document approval by the head of
the contracting activity, not just the Service Center Manager.
Proposed Action 6.2: The referenced guidance appears to apply solely to performance-based
service contracts, not T&M contracts.
Proposed Action 6.3: The OIG is supportive of the formulation of a Contract Management Plan
Guide. However, the assurance that it will establish processes and procedures in support of post-
award contract administration activities, as described, does not provide sufficient detail to address
the need for contract surveillance.
In response to the final report, the agency needs to include the following:
Corrective actions which are responsive to the recommendation or clarification as to why the
proposed actions are responsive.
An estimated completion date for any planned corrective actions.
A separate narrative for each recommendation. The agency used one narrative to respond to
recommendations 5, 6 and 8, and it is unclear which components of the proposed actions apply to
which recommendations.
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Recommendation #7: Conduct a contract-wide review of contract EP-W-07-067 to determine if
government property was improperly disposed.
Agency Response: "OARM agrees with this recommendation, and will work with OARM /FMSD to
investigate property disposition on the above contract, and take action based upon review results."
OIG Evaluation for Recommendation 7: The corrective action is acceptable, but the
recommendation is unresolved until an estimated completion date is provided.
Recommendation #8: Develop and implement new or additional training for EPA acquisition
personnel to communicate new requirements or expectations that arise from the recommendations
and findings in this report.
Agency Response:
"OARM agrees and has already implemented the following policies which address the circumstances
supporting these recommendations."
"With regard to communicating and training acquisition personnel on these policies, OAM has
already been using the self-assessment and peer review components of the BSC PMMP to identify
knowledge and training weaknesses among agency staff, and has implemented solutions (training,
policy) to address those shortcomings. OARM will continue to monitor and ensure compliance with
these policies through the self-assessment and peer review components of the BSC PMMP."
OIG Evaluation for Recommendation 8: The recommendation is unresolved.
Based on the information provided, it is not clear how the information addresses the intent of the
recommendation. We are supportive of OARM's proactive self-identification of training needs, but the
draft report has also identified training needs.
In response to the final report, the agency needs to include the following:
Corrective actions which are responsive to the recommendation or clarification as to why the
proposed actions are responsive.
An estimated completion date for any proposed corrective actions.
A separate narrative for each recommendation. The agency used one narrative to respond to
recommendations 5, 6 and 8, and it is unclear which components of the proposed actions apply to
which recommendations.
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Appendix C
Distribution
Office of the Administrator
Assistant Administrator for Administration and Resources Management
Agency Follow-Up Official (the CFO)
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Principal Deputy Assistant Administrator, Office of Administration and Resources Management
Director, Office of Acquisition Management, Office of Administration and
Resources Management
Director, Office of Administration, Office of Administration and Resources Management
Director, Office of Policy and Resources Management, Office of Administration and
Resources Management
Deputy Director, Office of Acquisition Management, Office of Administration and
Resources Management
Deputy Director, Office of Policy and Resources Management, Office of Administration and
Resources Management
Director, Headquarters Procurement Operations Division, Office of Acquisition Management,
Office of Administration and Resources Management
Audit Follow-Up Coordinator, Office of Administration and Resources Management
Audit Follow-Up Coordinator, Office of Acquisition Management, Office of Administration and
Resources Management
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