# Presentation: 021591

## Thriving Through Partnership 

**October 3 & 4, 2005**
**Chicago Marriott O’Hare Hotel **

## Overview of Pre-Award Audit Process 

**October 3 & 4, 2005**
**Chicago Marriott O’Hare Hotel **

## Topics

**The Acquisition Team**
**The Role of the Auditor**
**Dollar Thresholds Triggering Request**
**The Review Process**
**What is an Acceptable Offer**
**Objectives**
**Data Request**
**Disclose, Disclose, Disclose**

## Topics

**Recommendations to Contracting Officer**
**Reporting Process**
**Follow-up on Recommendations**
**Common Problem Areas**
**What Can Get a Contractor in Trouble**

## The Acquisition Team

**Contracting Officer**
**Contract Review & Evaluation**
**Acquisition Assistance**
**General Counsel**
**Pharmacy Benefits Management**

## The Role Of The Auditor

**Act in an advisory capacity to the contracting officer**
- Make recommendations regarding negotiation objectives
- Assist in negotiations as requested
- Identify pricing issues and work with the offeror and contracting officer to resolve them
**Detect fraud**
**Make recommendations to improve the contracting process**

## Dollar thresholds triggering request

**Pharmaceuticals ($5 M Annually)**
**All other Federal Supply Schedule ($3 M Annually)**
**Direct Delivery ($10 M Annually)**
**Requests for pre-award reviews on lesser-estimated award values**

## The Review Process

**Requested by the contracting officer after ensuring offeror has adequately responded to solicitation**
**Phone call to offeror from OIG auditor followed by a notification letter with request for records**
**Conduct review, communicate findings (factual only), allow contractor to respond as applicable, resolve issues, issue report to the contracting officer**

## What is an acceptable offer?

**Data provided that is responsive to the solicitation**
- Discount “ranges” are not acceptable
- Disclosure of one discount without a standard discounting policy is not acceptable
- If the offeror is a distributor, and commercial sales are insignificant, the offer must include Commercial Sales Practices (CSP) disclosures of the manufacturer if contract sales are expected to exceed $500,000

## What is an acceptable offer?

**Data provided that is responsive to the solicitation**
- Must disclose Most Favored Customer (MFC) even when claiming to offer the best discount
- Must disclose all customers receiving a price better than offered
- Data considered current within 60 days of the offer unless there is a change to the status of the disclosed MFC, in which case you must disclose up to date of award

## Objectives

**Verify and test offeror’s CSP disclosures to determine if information is accurate, complete, and current**
**Determine if proposed prices are equal to or better than the offeror’s MFCs**
**Identify those customers, if any, who are in receipt of prices better than offered to the Government, prices granted, and the yearly volume or other consideration on which better prices were based**

## Objectives

**Determine if commercial customers receive significant rebates or other concessions which lower the net price paid**
**Identify and justify a tracking customer(s) relative to the contract’s price reductions clause**

## Data Request

**Full support for disclosures, including detailed reports used to develop the disclosed discounts and sales information by item number or national drug code, both direct and indirect along with electronic sales transactions data as specified in our “Request for Electronic Data”**** **

**Notes:**
We do not want data on tapes.  Preferred media for the data is CD–ROM.  Other options are listed.
Acceptable media/methods: Compact Disc* 3.5” Floppy Disk Internet Download E–Mail (PGP Encryption available)
*Preferred method and format.
We prefer to receive all data and information in an electronic format(offer, CSP, pricelists, sales reports, contracts, etc.); however, it is sometimes necessary to receive hardcopy data such as copies of contracts.  Electronic copies of contracts are acceptable if they represent the complete contract.  Hardcopy of invoices are typically not needed unless information not included in the electronic record is contained on the actual invoice, and is needed to explain terms and conditions of a particular transaction.
Hardcopy format may be necessary for some forms of data such as commercial contracts; however, commercial contracts can be provided in electronic format if it represents the entire contract and contains all terms and conditions, pricing, and effective dates.
Hardcopy invoices are typically not needed.  Unless the hardcopy contains information that is not part of the electronic transaction record, and is needed to explain the terms and conditions of a particular transaction.  If the electronic record contains ALL information on the invoice, it would be rare occurrence to review hardcopies of invoices.
Media for electronic transactional data:
No tapes (unless no other alternative).
Preference is CD–ROM.
Other media is acceptable if CD–ROM is not viable (e–mail, internet download, Zip disk).
Format for electronic transactional data:
Prefer plain ASCII text, fixed width or delimited, with delimited ASCII text our preference.
Prefer not to deal with native formats such as Excel, Access, etc., but we can if necessary.
Record Layout of transactional data:
Suggested record layout would be provided and discussed, but would include basic invoice and customer information for each transaction.

## Data Request

**Discounting policies and procedures**** **
**In the event that the disclosed MFC is not offered, copies of agreements resulting in better prices should accompany the offer**** **

## Disclose, Disclose, Disclose

**Disclose and explain.  Don’t simply exclude transactions based upon criteria such as:**
- Deviations from standard discounting practice
- Transactions occurring in the population of transactions less than x number of times
- Nominal Prices
- Commercial contracts that are “expiring”

**Notes:**
Address the need to disclose to making the disclosure responsive to the solicitation.  In other words, an offeror cannot submit a truckload of documents and say to the contracting officer “I’ve disclosed everything”.

## Recommendations to Contracting Officer

**Accept prices as offered**
**Establish negotiation objectives at prices better than offered**
**Select tracking customer(s)**
**Pursue Blanket Purchase Agreements**
**Do not award a contract unless certain conditions are met**

## Reporting Process

**Report is issued to the requesting contracting officer with a copy to Assistant Director and to Acquisition Assistance Team**
**Objective is to issue the report to the contracting officer within 90 calendar days from receipt of an **_***adequate offer***_
**Only factual matters are confirmed with offeror**
**The report will likely conclude that the offer, in conjunction with our report, provides an adequate basis for negotiating an FSS contract**

## Reporting Process

**Timeliness can affect overall timeframes**
**CO reviews recommendations and instructions **
- Accurate, complete, current
- If information is updated, OIG may be asked to review new information and determine if recommendations should change
- If information is still good, CO to move forward with establishing overall objectives
- Pricing position
- If recommendation is not followed, CO must provide complete rationale and justification
- Suggested tracking customer
- If recommendation is not followed, CO must provide complete rationale and justification

## Follow-up on recommendations

**Review contracting officer’s Price Negotiation Memorandum to determine if our recommendations were sustained**

## Common Problem Areas

**Unavailability of data**
**Delays in providing the data requested**
**Insertion of confidentiality clauses in commercial contracts**
**Offer does not represent your commercial sales practice**

**Notes:**
Why we believe your company benefits by having an FSS contract.  Mandatory FSS.

## What Can Get a Contractor in Trouble - Defective Pricing

**Failure to disclose information or to disclose misleading information that could have an adverse impact on awarded prices**
- Non-disclosed discounts or concessions that result in better pricing in existence prior to contract award
- Disclosed discounts or concessions that the Government did not seek due to misrepresentations or misinformation from the contractor
- Audit Result:  Re-price the contract

## What Can Get a Contractor in Trouble – Price Reductions

**Only relevant issue is whether the customer is the tracking customer or is a member of the tracking customer**
**Comparability of the basis for the discount is not relevant to whether the Government is entitled to the discount under the Price Reductions Clause (if notification requirement was not met)**

## What Can Get a Contractor in Trouble – Price Reductions

**The tracking customer can be changed if we determine that inaccurate or incomplete information caused the contracting officer to select another tracking customer**

## Last Slide

**Q&A**
**John B. Ames**
- 202-565-4814
- _[john.ames@va.gov](mailto:john.ames@va.gov)_
**Marci Anderson**
- 202-565-5444
- _[marci.anderson@va.gov](mailto:marci.anderson@va.gov)_
**	****	****	****	****	****	**

**Carole O’Brien**
- 708-786-4957
- carole.obrien@med.va.gov
**Copy of Presentation will be made available after 5 p.m. on October 4**** ****at**** **_**[www.va.gov/vastorenac](http://www.va.gov/vastorenac)**_
***	******Thank You***