Department of Health and Human Services
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
MANAGEM ENT OF INFORMATION TECHNOLOGY 
  C
ONTRACTS AT                                     
 
T F D A 
HE  OOD AND  RUG  DMINISTRATION S           
 
C D E R
ENTER FOR  RUG  VALUATION AND  ESEARCH
 
 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
January 2009 
OEI-01-07-00450   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1.  To assess the Food and Drug Administrations (FDA) Center for Drug 
Evaluation and Research (CDER) process for selecting information 
technology (IT) contractors from fiscal year (FY) 2004 to FY 2007. 
2.  To determine the extent to which CDER monitored the performance 
of its IT contractors from FY 2004 to FY 2007. 
BACKGROUND 
In FY 2006, the Department of Health and Human Services spent     
$5.4 billion on IT.  Overall, Federal spending on IT has long been 
considered high risk for fraud, waste, and abuse because of the 
significant cost involved and insufficient planning on the part of Federal 
agencies.     
The Office of Inspector General conducted a review of the IT contracting 
practices of FDAs CDER at the request of the Senate Committee on 
Finance.  The request was in response to a draft consulting report that 
raised questions about the management of CDERs IT contracts.  The 
Office of Information Technology was responsible for planning and 
managing many of the IT services for CDER.  The Federal Acquisition 
Regulation (FAR) governs how all Federal agencies, including FDA, may 
acquire supplies and services with appropriated funds. 
Agencies must establish procedures to select qualified contractors while 
protecting the Government from unnecessary financial risk.  To ensure 
that contracted work is performed efficiently and funds are used 
effectively, agencies must perform acquisition planning, clearly define 
what they are buying in a statement of work, and select an appropriate 
contract type and method.  Agencies may use several types of contracts 
to acquire supplies and services.  One such type is time-and-materials, 
whereby the Government pays the contractor a fixed amount for hourly 
labor and generally reimburses it for any costs of materials.  In 
addition, agencies must use performance-based contracting for a 
designated proportion of contracts to encourage contractors to focus on 
achieving specific outcomes.  With limited exceptions, agencies must 
provide for full and open competition.  Once contracted work begins, 
agencies must monitor contractors to ensure quality results.     
OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  i 
   
  
   
E X E C U T I V E   S U M M A R Y  
We reviewed the contractor selection, performance measurement and 
quality assurance (QA) plans, and the performance monitoring for       
28 CDER OIT contract actions.  We also interviewed five current or 
former CDER contract project officers.  
FINDINGS 
CDERs contract actions demonstrated limited IT planning and 
increased risk for the Government.  CDER used broad language to 
describe requirements in its statements of work, allowing it to specify 
its requirements over time.  CDER relied primarily on acquisition 
methods that emphasize speed and flexibility over planning.  CDER also 
relied on time-and-materials contract actions that increase risk for the 
Government.  Because of these decisions, CDER may not achieve the 
benefits of performance-based acquisition.   
CDER used quality assurance and monitoring plans inconsistently.   
Because CDER did not clearly define its requirements or performance 
measures, it also did not establish QA plans consistently.  Twenty-one of 
twenty-eight contract actions reviewed did not have documented QA 
plans.  Of the seven contract actions that included QA plans, three 
contained identical plans with generic language calling for 100-percent 
inspection of deliverables using the same checklist of qualitative 
measures.     
RECOMMENDATIONS 
Several areas of concern exist with CDERs IT planning process and its 
contract monitoring.  Although the IT contract actions reviewed were 
generally compliant with the FAR, FDA could minimize its contract risk 
by making the following changes:    
Define IT requirements more clearly.  FDA should revise its planning 
processes to define IT requirements in greater detail.  This step could lead 
to additional contracting options and create greater efficiencies in 
contractor selection and project management as well. 
Convert ongoing time-and-materials contract actions to fixed-price contract 
actions when appropriate.  Converting ongoing time-and-materials contract 
actions to fixed-price contract actions would reduce the financial risk 
borne by the Government and may allow FDA to obtain the same services 
at a reduced cost.  Converting time-and-materials contract actions to     
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  ii   
  
   
E X E C U T I V E   S U M M A R Y  
 
fixed-price contract actions would also reduce the amount of oversight 
needed to ensure labor efficiency.   
 
Use performance incentive plans when appropriate.  Use of performance 
incentives could allow FDA to reduce contract costs by tying the 
contractors profit or award fees to quantifiable performance standards. 
 
Use documented QA plans.  Implementing documented QA plans in its 
contract actions would allow FDA to create a mechanism for contractor 
accountability by identifying services that do not meet defined 
requirements.  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE
 
FDA agreed with three of our four recommendations and identified 
steps it is taking to implement them.  FDA neither agreed nor disagreed 
with our first recommendation to define its IT requirements more 
clearly.  However, it did identify actions it is taking that support that 
recommendation.  In addition, FDA agreed with our other 
recommendations to convert time-and-materials contracts to fixed-price 
contracts when appropriate and to use performance incentives and 
quality assurance plans when applicable.  We ask that in its final 
management decision, FDA more clearly indicate whether it concurs 
with our first recommendation and what steps it will take to  
implement it. 
 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  iii   
  
   
 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
C O NT RAC T ING  PR IMER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 
 
 
F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 
     Limited planning and increased risk.. . . . . . . . . . . . . . . . . . . . . . . . . 10 
     Inconsistent quality assurance and monitoring. . . . . . . . . . . . . . . . . 13 
 
 
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 
        Agency Comments and Office of Inspector General Response . . . . 16 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 
     A:  Glossary of Abbreviations, Acronyms, and Contracting Terms. . 18 
     B:  Legal Authorities Governing Federal Acquisitions . . . . . . . . . . . 20   
     C:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 
   
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  iv   
  
   
 I N T R O D U C T I O N  
OBJECTIVES 
1.  To assess the Food and Drug Administrations (FDA) Center for Drug 
Evaluation and Research (CDER) process for selecting information 
technology (IT) contractors from fiscal year (FY) 2004 to FY 2007. 
2.  To determine the extent to which CDER monitored the performance 
of its IT contractors from FY 2004 to FY 2007. 
BACKGROUND 
In FY 2006, the Department of Health and Human Services (HHS) 
spent $5.4 billion on IT.1  Overall, Federal spending on IT has long been 
considered high risk for fraud, waste, and abuse because of the 
significant cost involved and insufficient planning on the part of Federal 
agencies.  In 1996, Congress passed the Clinger-Cohen Act to improve 
the way Federal agencies acquire and manage IT services.2  The Act 
requires agencies to develop best practices for the acquisition of 
commercial IT services and to monitor contracted IT services through 
performance measurement.3  Despite these efforts, IT contracting 
remains a high-risk area for the Federal Government.4   
The Office of Inspector General conducted a review of the IT contracting 
practices of FDAs CDER at the request of the Senate Committee on 
Finance.  The request was in response to a draft consulting report that 
raised questions about the management of CDERs IT contracts.  The 
draft report specifically addressed CDERs management of an IT project 
called the Adverse Event Reporting System II.5   This system was 
intended to be a database for collecting adverse event information for 
prescription drugs.  The draft report indicated that CDERs Office of 
Information Technology (OIT) mismanaged the project, resulting in cost 
overruns and decreased productivity.  The draft report also questioned 
OITs contractor selection and management processes. 
 
1 Office of Management and Budget, Report on Information Technology Spending for the 
Federal Government, May 2007.   
2 P.L. 104-106, Div. E (1996); 40 U.S.C.  11101 et seq. 
3 40 U.S.C.  11302(f), 11313. 
4 For example, see United States Government Accountability Office (GAO), High-Risk 
Series:  Information Management and Technology, GAO/HR-97-9, February 1997.  See also 
GAO, Information Technology:  Further Improvements Needed to Identify and Oversee 
Poorly Planned and Performing Projects, GAO-07-1211T, September 20, 2007.   
5 Breckenridge Institute, Independent Verification and Validation of AERS II 
Requirements Process, November 2006. 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  1   
  
   
I N T R O D U C T I O N   
CCDDEERR  iiss  rreessppoonnssiibbllee  ffoorr  eennssuurriinngg  tthhaatt  ddrruuggss  mmaarrkkeetteedd  wwiitthhiinn  tthhee  
UUnniitteedd  SSttaatteess  aarree  ssaaffee  aanndd  eeffffeeccttiivvee..    TThhiiss  rreessppoonnssiibbiilliittyy  bbeeggiinnss  iinn  tthhee  
rreesseeaarrcchh  aanndd  ddeevveellooppmmeenntt  ssttaaggee  ooff  aa  ppootteennttiiaall  ddrruugg  aanndd  ccoonnttiinnuueess  
tthhrroouugghhoouutt  tthhee  lliiffee  ooff  aa  mmaarrkkeetteedd  ddrruugg..    IInn  kkeeeeppiinngg  wwiitthh  iittss  mmiissssiioonn,,  
CCDDEERR  rreecceeiivveess  llaarrggee  aammoouunnttss  ooff  eelleeccttrroonniicc  iinnffoorrmmaattiioonn,,  ssuucchh  aass  cclliinniiccaall  
ttrriiaall  ddaattaa  aanndd  aaddvveerrssee  eevveenntt  rreeppoorrttss..    IItt  iiss  ccrriittiiccaall  tthhaatt  CCDDEERR  pprrooccuurree  IITT  
ssyysstteemmss  aanndd  sseerrvviicceess  tthhaatt  mmeeeett  iittss  nneeeeddss  iinn  aa  ccoosstt--eeffffeeccttiivvee  mmaannnneerr,,  
wwhhiillee  aallssoo  ccoommppllyyiinngg  wwiitthh  rreelleevvaanntt  aaccqquuiissiittiioonn  rreegguullaattiioonnss..  
CCDDEERR  IITT  PPllaannnniinngg  aanndd  CCoonnttrraaccttiinngg  PPrroocceesssseess  
OOIITT  wwaass  rreessppoonnssiibbllee  ffoorr  ppllaannnniinngg  aanndd  mmaannaaggiinngg  mmaannyy  ooff  tthhee  IITT  sseerrvviicceess  
ffoorr  CCDDEERR..66    AAss  ooff  MMaayy  22000088,,  OOIITT  hhaadd  4400  ssttaaffff  mmeemmbbeerrss  aaccrroossss  tthhrreeee  
bbrraanncchheess::    EEnntteerrpprriissee  AArrcchhiitteeccttuurree,,  AApppplliiccaattiioonn  DDeevveellooppmmeenntt,,  aanndd  
QQuuaalliittyy  AAssssuurraannccee..    OOIITT  aanndd  iittss  ccoouunntteerrppaarrttss  ffrroomm  tthhee  ootthheerr  FFDDAA  
cceenntteerrss  wweerree  ddiissbbaannddeedd  aanndd  aabbssoorrbbeedd  aatt  tthhee  eenndd  ooff  FFYY  22000088  iinnttoo  oonnee  
aaggeennccyywwiiddee  OOffffiiccee  ooff  IInnffoorrmmaattiioonn  MMaannaaggeemmeenntt..      
PPrriioorr  ttoo  tthhee  rreeoorrggaanniizzaattiioonn,,  CCDDEERR  ccoommppoonneennttss  wwoorrkkeedd  wwiitthh  OOIITT  ttoo  
ddeevveelloopp  aanndd  iimmpplleemmeenntt  nneeww  IITT  ssyysstteemmss..    WWhheenn  CCDDEERR  iiddeennttiiffiieedd  aann  IITT  
nneeeedd,,  ssuucchh  aass  nneeww  ssooffttwwaarree,,  hhaarrddwwaarree,,  oorr  ssuuppppoorrtt,,  iitt  wwoorrkkeedd  wwiitthh  OOIITT  ttoo  
ddeevveelloopp  aa  pprrooppoossaall  ffoorr  CCDDEERRss  IInnffoorrmmaattiioonn  MMaannaaggeemmeenntt  SStteeeerriinngg  
CCoommmmiitttteeeess  PPllaannnniinngg  SSuubbccoommmmiitttteeee  ((tthhee  PPllaannnniinngg  SSuubbccoommmmiitttteeee))..77    
OOIITT  ccoonndduucctteedd  vvaarriioouuss  aannaallyysseess  ttoo  iinncclluuddee  wwiitthh  tthhee  pprrooppoossaall,,  aanndd  
ddeetteerrmmiinneedd  wwhheetthheerr  iitt  hhaadd  tthhee  eexxppeerrttiissee  ttoo  mmeeeett  eeaacchh  IITT  rreeqquueesstt  wwiitthh  
iinntteerrnnaall  rreessoouurrcceess  oorr  wwhheetthheerr  iitt  wwoouulldd  nneeeedd  ttoo  hhiirree  aa  ccoonnttrraaccttoorr..88          
IIff  tthhee  pprrooppoossaall  wwaass  aapppprroovveedd  bbyy  tthhee  PPllaannnniinngg  SSuubbccoommmmiitttteeee  aanndd  OOIITT  
ddeecciiddeedd  ttoo  hhiirree  aa  ccoonnttrraaccttoorr,,  OOIITT  ssttaaffff  wwoorrkkeedd  wwiitthh  FFDDAAss  OOffffiiccee  ooff  
AAccqquuiissiittiioonn  aanndd  GGrraanntt  SSeerrvviicceess  ((tthhee  AAccqquuiissiittiioonn  OOffffiiccee))..    TThhee  AAccqquuiissiittiioonn  
OOffffiiccee  aaddmmiinniisstteerrss  ccoonnttrraaccttss  ffoorr  aallll  ooff  FFDDAA,,  iinncclluuddiinngg  CCDDEERR..99    OOnnllyy  
ccoonnttrraaccttiinngg  ooffffiicceerrss  wwiitthhiinn  tthhee  AAccqquuiissiittiioonn  OOffffiiccee  hhaavvee  tthhee  aauutthhoorriittyy  ttoo  
eenntteerr  iinnttoo,,  aaddmmiinniisstteerr,,  oorr  tteerrmmiinnaattee  aa  ccoonnttrraacctt  oonn  bbeehhaallff  ooff  FFDDAA..1100    
PPrroojjeecctt  ooffffiicceerrss  ffrroomm  OOIITT  pprroovviiddee  tteecchhnniiccaall  eexxppeerrttiissee  ttoo  tthhee  AAccqquuiissiittiioonn  
OOffffiiccee  aanndd  mmoonniittoorr  tthhee  ccoonnttrraaccttoorr  ttoo  eennssuurree  tthhaatt  CCDDEERR  rreecceeiivveess  wwhhaatt  iitt  
  
66  FFDDAAss  OOffffiiccee  ooff  tthhee  CChhiieeff  IInnffoorrmmaattiioonn  OOffffiicceerr  ppllaannss  aanndd  mmaannaaggeess  ccrroossss--cceenntteerr  IITT  
services.  Some services used by CDER are not managed by OIT, such as data entry.  This 
review will focus on IT services planned and managed by CDERs OIT exclusively.       
7 The planning subcommittee is also called the Information Management Advisory 
Board. 
8 HHS, FDA, CDER, Manual of Policies and Procedures, MAPP 7600.9, Information 
Management Steering Committee Planning Subcommittee, March 4, 2005, p. 6.  
9 The Acquisition Office will continue this role after the reorganization. 
10 48 CFR  1.602-1(a).   
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  2   
  
   
I N T R O D U C T I O N  
  
hhaass  ppaaiidd  ffoorr,,  wwhhiillee  aallssoo  eennssuurriinngg  tthhaatt  iitt  ccoommpplliieess  wwiitthh  tthhee  FFeeddeerraall  
AAccqquuiissiittiioonn  RReegguullaattiioonn  ((FFAARR))..1111        
CCoonnttrraaccttiinngg  BBaassiiccss    
IInn  FFYY  22000066,,  tthhee  GGoovveerrnnmmeenntt  bboouugghhtt  oovveerr  $$440000  bbiilllliioonn  wwoorrtthh  ooff  ggooooddss  
aanndd  sseerrvviicceess..1122    TThhee  FFAARR  ggoovveerrnnss  hhooww  aallll  FFeeddeerraall  aaggeenncciieess,,  iinncclluuddiinngg  
FFDDAA,,  aaccqquuiirree  ssuupppplliieess  aanndd  sseerrvviicceess  wwiitthh  aapppprroopprriiaatteedd  ffuunnddss..1133    AAggeenncciieess  
aallssoo  pprroommuullggaattee  tthheeiirr  oowwnn  rreegguullaattiioonnss  aass  nneeeeddeedd  ttoo  ssuupppplleemmeenntt  tthhee  
FFAARR..    IInn  aaddddiittiioonn  ttoo  tthhee  FFAARR,,  FFDDAA  aaccqquuiissiittiioonnss  mmuusstt  ccoonnffoorrmm  ttoo  
rreegguullaattiioonnss  sseett  ffoorrtthh  iinn  tthhee  HHHHSS  AAccqquuiissiittiioonn  RReegguullaattiioonn  aanndd  tthhee  FFDDAA  
AAccqquuiissiittiioonn  OOppeerraattiinngg  IInnssttrruuccttiioonnss..1144    
TToo  ccoommppllyy  wwiitthh  tthhee  FFAARR,,  aaggeenncciieess  mmuusstt  eessttaabblliisshh  pprroocceedduurreess  ttoo  sseelleecctt  
qquuaalliiffiieedd  ccoonnttrraaccttoorrss  wwhhiillee  pprrootteeccttiinngg  tthhee  GGoovveerrnnmmeenntt  ffrroomm  
uunnnneecceessssaarryy  ffiinnaanncciiaall  rriisskk..    TToo  eennssuurree  tthhaatt  ccoonnttrraacctteedd  wwoorrkk  iiss  
ppeerrffoorrmmeedd  eeffffiicciieennttllyy  aanndd  ffuunnddss  aarree  uusseedd  eeffffeeccttiivveellyy,,  aaggeenncciieess  mmuusstt  
ppeerrffoorrmm  aaccqquuiissiittiioonn  ppllaannnniinngg,,1155  cclleeaarrllyy  ddeeffiinnee  wwhhaatt  tthheeyy  aarree  bbuuyyiinngg  iinn  
tthhee  rreeqquuiirreemmeennttss  sseeccttiioonn  ooff  aa  ssttaatteemmeenntt  ooff  wwoorrkk,,1166  aanndd  sseelleecctt  aann  
aapppprroopprriiaattee  ccoonnttrraacctt  ttyyppee  aanndd  mmeetthhoodd..1177    IInn  aaddddiittiioonn,,  aaggeenncciieess  mmuusstt  uussee  
ppeerrffoorrmmaannccee--bbaasseedd  ccoonnttrraaccttiinngg  ffoorr  aa  ddeessiiggnnaatteedd  pprrooppoorrttiioonn  ooff  ccoonnttrraaccttss  
ttoo  eennccoouurraaggee  ccoonnttrraaccttoorrss  ttoo  ffooccuuss  oonn  aacchhiieevviinngg  ssppeecciiffiicc  oouuttccoommeess..1188    WWiitthh  
lliimmiitteedd  eexxcceeppttiioonnss,,  aaggeenncciieess  mmuusstt  pprroovviiddee  ffoorr  ffuullll  aanndd  ooppeenn  ccoommppeettiittiioonn  
wwhheenn  aaccqquuiirriinngg  ggooooddss  aanndd  sseerrvviicceess..1199    OOnnccee  ppeerrffoorrmmaannccee  bbeeggiinnss,,  
aaggeenncciieess  mmuusstt  mmoonniittoorr  ccoonnttrraaccttoorrss  ttoo  eennssuurree  qquuaalliittyy  rreessuullttss..2200          
FFoorr  mmoorree  iinnffoorrmmaattiioonn  oonn  ccoonnttrraaccttiinngg  rreegguullaattiioonnss  aanndd  tteerrmmiinnoollooggyy,,  sseeee  
tthhee  CCoonnttrraaccttiinngg  PPrriimmeerr  ssttaarrttiinngg  oonn  ppaaggee  77..    SSeeee  AAppppeennddiixx  AA  ffoorr  
aabbbbrreevviiaattiioonnss  aanndd  aaccrroonnyymmss  uusseedd  iinn  tthhiiss  rreeppoorrtt  aanndd  AAppppeennddiixx  BB  ffoorr  
lleeggaall  aauutthhoorriittiieess  ggoovveerrnniinngg  FFeeddeerraall  aaccqquuiissiittiioonnss..  
  
1111  4488  CCFFRR    330022..11..    
12 Trending Analysis Report Since Fiscal Year 2000.  Available online at: 
http://www.fpdsng.com/downloads/top_requests/FPDSNG/5YearViewOnTotals.xls.   
Accessed May 30, 2008. 
13 The FAR, located at 48 CFR ch.1, is authorized by the Office of Federal Procurement 
Policy Act of 1974, as amended.  41 U.S.C.  405a.  
14 HHS Acquisition Regulation, 48 CFR ch. 3;  FDA, Acquisition Operating 
Instructions, on file at FDA. 
15 FAR  7.102(a)(b). 
16 Ibid.,  11.002(a). 
17 Ibid.,  16.104. 
18 Office of Management and Budget, Fiscal Year 2008 Performance-Based Acquisition 
Performance Goal, December 5, 2007. 
19 FAR,  6.101. 
20 Ibid.,  46.102, 46.103. 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  3   
  
   
I N T R O D U C T I O N  
  
AAccqquuiissiittiioonn  AAddvviissoorryy  PPaanneell  RReeppoorrtt    
TThhee  SSeerrvviicceess  AAccqquuiissiittiioonn  RReeffoorrmm  AAcctt  ooff  22000033  ccrreeaatteedd  tthhee  AAccqquuiissiittiioonn  
AAddvviissoorryy  PPaanneell  ((AAAAPP))  ttoo  rreevviieeww  FFeeddeerraall  aaccqquuiissiittiioonn  llaawwss  aanndd  
rreegguullaattiioonnss  aanndd  mmaakkee  rreeccoommmmeennddaattiioonnss  ttoo  iimmpprroovvee  ccoonnttrraaccttiinngg  
pprraaccttiicceess..2211    IIttss  JJaannuuaarryy  22000077  rreeppoorrtt  hhiigghhlliigghhtteedd  pprroobblleemmss  wwiitthhiinn  
FFeeddeerraall  ccoonnttrraaccttiinngg,,  iinncclluuddiinngg::  
   tthhee  GGoovveerrnnmmeennttss  ffaaiilluurree  ttoo  aaddeeqquuaatteellyy  ddeeffiinnee  iittss  sseerrvviiccee  
rreeqquuiirreemmeennttss,,  wwhhiicchh  lleeaaddss  ttoo  aa  rreelliiaannccee  oonn  ttiimmee--aanndd--mmaatteerriiaallss  
ccoonnttrraaccttss2222  aanndd  rreedduucceess  tthhee  bbeenneeffiittss  ooff  ccoommppeettiittiioonn;;2233    
   tthhee  iimmppoorrttaannccee  ooff  ddeeffiinniinngg  sseerrvviiccee  rreeqquuiirreemmeennttss  ttoo  oobbttaaiinn  tthhee  
mmaaxxiimmuumm  bbeenneeffiitt  ooff  ppeerrffoorrmmaannccee--bbaasseedd  aaccqquuiissiittiioonnss  ccoonncceeppttss;;2244  
aanndd  
   tthhee  aaccqquuiissiittiioonn  wwoorrkkffoorrcceess  cchhaalllleennggeess  iinn  wwrriittiinngg  ppeerrffoorrmmaannccee  
mmeeaassuurreess  aanndd  mmeettrriiccss2255  aanndd  iittss  iinnssuuffffiicciieenntt  ssuurrvveeiillllaannccee  ooff            
mmuullttiiaaggeennccyy  ccoonnttrraaccttss..2266  
RReecceenntt  UUnniitteedd  SSttaatteess  GGoovveerrnnmmeenntt  AAccccoouunnttaabbiilliittyy  OOffffiiccee  RReeppoorrtt    
AA  rreecceenntt  GGAAOO  rreeppoorrtt  ddeemmoonnssttrraatteess  tthhee  ssaammee  pprroobblleemmss  wwiitthh  FFeeddeerraall  
ccoonnttrraaccttiinngg  tthhaatt  wweerree  hhiigghhlliigghhtteedd  iinn  tthhee  AAAAPP  rreeppoorrtt..    GGAAOOss  rreevviieeww  ooff  
tthhee  DDeeppaarrttmmeenntt  ooff  DDeeffeennsseess  uussee  ooff  ttiimmee--aanndd--mmaatteerriiaallss  ccoonnttrraaccttss  ffoouunndd  
tthhaatt  tthhee  DDeeppaarrttmmeenntt  uusseess  tthheemm  bbeeccaauussee  tthheeyy  ccaann  bbee  aawwaarrddeedd  qquuiicckkllyy  
aanndd  ccaann  bbee  aaddjjuusstteedd  iiff  rreeqquuiirreemmeennttss  cchhaannggee..    GGAAOO  aallssoo  ffoouunndd  tthhaatt  tthhee  
DDeeppaarrttmmeennttss  mmoonniittoorriinngg  ooff  ttiimmee--aanndd--mmaatteerriiaallss  ccoonnttrraaccttss  wwaass  nnoott  
ssuuffffiicciieenntt  ggiivveenn  tthhee  iinnhheerreenntt  rriisskkss  ooff  tthhiiss  ccoonnttrraacctt  ttyyppee..2277  
  
  
  
  
  
  
2211  NNaattiioonnaall  DDeeffeennssee  AAuutthhoorriizzaattiioonn  AAcctt  ffoorr  FFiissccaall  YYeeaarr  22000044,,  PP..LL..  NNoo..  110088--113366,,    11442233  
(2003). 
22 AAP, Report of the Acquisition Advisory Panel to the Office of Federal Procurement 
Policy and the United States Congress, January 2007, pp. 7 and 92. 
23 Ibid., pp. 7 and 92. 
24 Ibid., p. 8. 
25 Ibid., p. 178. 
26 Ibid., p. 93. 
27 GAO, Defense Contracting:  Improved Insight and Controls Needed over DoDs   
Time-and-Materials Contracts, GAO-07-273, June 2007.  
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  4   
  
   
I N T R O D U C T I O N  
  
MMEETTHHOODDOOLLOOGGYY  
Scope 
We reviewed CDERs contract actions for IT purchases valued at 
$250,000 or more issued from FY 2004 to FY 2007.  The contract actions 
covered a range of IT services from upgrading and operating IT systems 
to migrating legacy IT systems into new ones.  For each contract action, 
we included the value of all options and modifications.  We used the 
Federal Procurement Data System to collect additional information and 
confirm the maximum dollar value.   
Our final review consisted of 28 contract actions.  Of these 28 actions,         
19 were delivery orders generated from three blanket purchase 
agreements (BPAs).28  We excluded contract actions that were not 
overseen by CDER OIT.       
Data Sources and Analysis 
Review of Office of Information Technology contract actions.  For the 28 
contract actions reviewed, we reviewed elements of the contract files to 
determine the extent to which CDER and the Acquisition Office used 
full and open competition as prescribed by the FAR.  For those actions 
that were competed, we also examined the criteria that CDER used to 
evaluate prospective contractors and determined how these criteria 
were weighed during the selection process.   
In determining the extent to which CDER monitored the performance of 
its IT contractors, we reviewed performance measurement and quality 
assurance (QA) plans that were written into the contract actions.  We 
also reviewed evidence of CDERs monitoring activities and determined 
the extent to which CDER monitored contract actions after they were 
awarded.    
Interviews with Center for Drug Evaluation and Research project officers.  We 
interviewed five current or former CDER project officers to obtain 
additional background information on specific contract actions, the  
 
 
 
28 We note that the FAR defines delivery order to mean a contract action for products 
and task order to mean a contract action for services.  FAR  2.101.  Although our sample 
contract actions included mostly task orders for services, we sometimes use the term 
delivery order to refer to these contract actions because FDAs Acquisition Office used this 
term and the documents are labeled as delivery orders.     
 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  5   
  
   
I N T R O D U C T I O N  
contract-monitoring process, and any challenges that they faced in 
carrying out their duties. 
Limitations 
We did not assess the qualifications of the contractors that CDER 
selected or the technology solutions that they provided. 
Standards 
We conducted this review in accordance with the Quality Standards for 
Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  6   
  
   
 C O N T R A C T I N G   P R I M E R  
 
Overview 
The FAR and applicable agency-specific supplements govern purchases 
of supplies or services using appropriated funds.  Pursuant to these 
regulations and other applicable authorities, agencies must generally: 
  provide for full and open competition when awarding contracts;   
  select contractors based on objective evaluation factors; and 
  conduct contract monitoring, including establishing a QA plan and 
ensuring that the contractors comply with the plans and any 
deadlines. 
Additionally, legal authorities have established a preference for 
performance-based acquisition (PBA) of services.  Although the 
Government previously dictated how contractors should perform their 
work, PBA requires Federal agencies to state their requirements in 
terms of desired outcomes or results and allows the contractors to 
perform the work in any manner they deem appropriate.  To ensure that 
outcomes are achieved, PBA contracts must contain measurable 
performance standards by which to assess the contractors work and 
performance incentives.    
Acquisition Methods  
Various acquisition methods are available to Federal agencies.  
Specifically, agencies may acquire supplies and services by:  
1.  Awarding a new stand-alone contract directly to a vendor and 
administering it.  Generally, this method requires the greatest 
administrative burden because the agency must perform market 
research to, among other things, identify qualified contractors; to 
conduct a competition; and to evaluate proposals or quotes.  
Agencies are then obligated to administer the contract.  
2.  Ordering directly under an existing contract established by another 
agency.  These contracts, called multiagency contracts or 
governmentwide acquisition contracts, often require the ordering 
agency to pay an additional fee for contract use.  The main benefit of 
using this method is a decreased administrative burden associated 
with the contract award process. 
3.  Ordering from the General Services Administrations (GSA) Federal 
Supply Schedule (FSS) program.  Under FSS, contractors do not 
compete directly against each other in obtaining the initial contract   
 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  7   
  
   
C O N T R A C T I N G   P R I M E R  
 
award.  Instead, GSA negotiates pricing and terms with FSS vendors 
that provide commercial goods and services based on the vendors 
own pricing to their commercial customers.  Agencies may then place 
orders under these FSS contracts.  FSS orders are considered to be 
fully competed if agencies follow certain ordering procedures 
specified by regulation. 
Contract Types 
The contract type establishes the performance obligations of the 
contractor and the payment obligations of the Government.  Agencies 
may use several types of contracts to acquire supplies or services, 
including: 
 Time-and-materials contracts.  Under this contract type, the 
Government pays the contractor a fixed amount for hourly labor 
(including wages, overhead, and profit) and generally reimburses for 
any costs of materials.  These contracts, which specify a maximum 
dollar amount (ceiling price), may be used only when it is not 
possible to reasonably estimate the extent or duration of work or its 
costs.  These contracts provide no incentive for the contractor to 
control costs or ensure labor efficiency and therefore require 
monitoring to ensure that efficient methods and effective cost 
controls are used.  
 Cost-reimbursement contracts.  Under a cost-reimbursement contract, 
the Government reimburses the contractor for its allowable costs, 
including labor and materials.  The contractor has no incentive to 
control costs, and the Government assumes the financial risk that 
the service or supplies will be delivered in a cost-effective manner.   
 Fixed-price contracts.  Under a fixed-price contract, the contractor is 
paid a fixed amount for performing the work or producing 
deliverables regardless of the actual cost.  The contractor, therefore, 
assumes all performance and financial risk and has an incentive to 
control costs while delivering the supplies or services. 
Other Contracting Terms 
Statement of work.  A statement of work is a document that describes the 
contracts purpose and the goods or services required under the 
contract.   
Full and open competition.  With certain limited exceptions, agencies must 
acquire goods and services using full and open competition and  
 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  8   
  
   
C O N T R A C T I N G   P R I M E R  
competitive procedures.  For stand-alone contracts, competitive 
procedures often involve soliciting proposals or sealed bids.  With 
respect to the FSS, task or delivery orders are considered competitive if 
they are placed using regulatory procedures.  Further, an agency must 
provide written justification and approval before awarding a contract 
directly to a sole source under a stand-alone contract or an FSS order. 
Blanket purchase agreement.  BPAs are agreements, usually entered into 
under FSS contracts, that are intended for agencies that anticipate 
having recurring needs for supplies or services.  Task and delivery 
orders may be placed under such BPAs. 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  9   
  
   
 F I N D I N G S  
CDERs contract files contained 
CDERs contract actions demonstrated limited IT 
basic documentation required 
planning and increased risk for the Government 
under the FAR.  However, the 
 
agency used broad language in its 
statements of work that failed to describe specific requirements, 
suggesting that it had not thoroughly planned its IT service 
acquisitions.  In addition, CDER acquired IT services primarily through 
flexible acquisition methods and time-and-materials contract actions 
that reduce the agencys administrative burden but increase risk for the 
Government.  The AAP report highlighted the importance of acquisition 
planning, which includes improved competition and innovative solutions 
at the best prices.29 
CDER used broad language to describe requirements in its statements of 
work  
Several FSS orders used identical language to describe requirements in 
the statements of work even when the orders were for different services.  
For example, six of nine orders under one BPA contained statements of 
work with identical lists of requirements that the contractor would 
provide.  These lists included IT project management support, IT 
planning and other support, and IT analysis and support.  Broad 
requirements language provided CDER with the flexibility to specify its 
requirements over time.    
Another FSS order contained broad language stating that the contractor 
will assist with the analysis, development of plans, script writing, and 
documentation to be implemented immediately under the contract or at 
a later date by government employees.  The project officer responsible 
for this order told us that CDER wrote this statement of work to match 
the contractors expertise and that the actual tasks that the contractor 
performed were specifically defined only after award, when CDER 
identified its requirements.30  Another project officer highlighted the 
difficulty in defining specific requirements because routine maintenance 
tasks were difficult to capture in a statement of work.       
In addition, other statements of work contained lists of tasks that were 
never ultimately requested by CDER.  For example, four of nine orders 
 
29 AAP, Report of the Acquisition Advisory Panel to the Office of Federal Procurement 
Policy and the United States Congress, January 2007, p. 7. 
30 The FAR does provide authority for limiting sources under FSS orders.  FAR  8.405-6.  
For this contract action, CDERs contract file contained a justification document explaining 
why competition was limited.        
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  10   
  
   
F I N D I N G S  
 
under one BPA included statements of work listing emergency software 
releases and various administrative reports that CDER never 
requested.  One project officer told us that CDER may write a statement 
of work broadly in case the contractor needs to perform tasks in those 
areas later. 
Overall, using broad requirements in statements of work is prevalent 
throughout Government.  AAP attributes the inability to clearly define 
requirements to the acquisition culture of getting to award, budgetary 
time pressures, and an inexperienced contracting workforce.31  
CDER relied primarily on acquisition methods that emphasize speed and 
flexibility over planning   
In its contractor selection, CDER relied on acquisition methods that 
have streamlined procedures, including competition requirements.  
CDER used the FSS or governmentwide acquisition contracts for         
27 of 28 contract actions reviewed.   
Although the FAR provides for streamlined procedures, the AAP report 
raised concerns about FSS orders and governmentwide contracts that 
contain broad scopes of work and lack acquisition planning, stating that 
they may result in little meaningful competition.32  CDERs reliance on 
FSS reflects a larger trend across Government, in which the use of FSS 
had grown to $35.1 billion by FY 2006.33  One GSA study found that 
placing orders through FSS decreased the turnaround time for placing 
an order from 268 days to 15 days.34 
Of the 27 contract actions that were FSS or governmentwide acquisition 
contract actions, 24 were FSS orders.  Nineteen of those twenty-four 
contract actions were delivery orders placed against three BPAs, and 
the remaining five were single orders.  Three of the twenty-seven 
contract actions were governmentwide acquisition contract actions 
awarded through interagency agreements.35  
 
31 AAP, Report of the Acquisition Advisory Panel to the Office of Federal Procurement 
Policy and the United States Congress, January 2007, p. 7. 
32 Ibid., pp. 9192. 
33 GSA Data, Contractors Report of Sales  Schedule Sales FY 2006 Final, October 
2006 (on file with GSA). 
34 J.W. Chierichella and J.S. Aronie, Multiple Award Schedule Contracting.  Xlibris 
Corp., 2002, p. 41, cited in AAP, Report of the Acquisition Advisory Panel to the Office of 
Federal Procurement Policy and the United States Congress, January 2007, p. 234.   
35 Multiple Award Schedule Contracts are awarded by GSA or the Department of 
Veterans Affairs for similar or comparable supplies or services, established with more than 
one supplier, at varying prices.  The FSS program is also known as the GSA Schedules 
Program or the Multiple Award Schedule Program.  See FAR 8.401402(a). 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  11   
  
  F I N D  I N G S  
  
CCDDEERR  uusseedd  tthhee  FFSSSS  pprriimmaarriillyy  ttoo  pprrooccuurree  IITT  ssuuppppoorrtt  sseerrvviicceess,,  ssuucchh  aass  
pprrooggrraamm  mmaannaaggeemmeenntt  oorr  tteecchhnniiccaall  wwrriittiinngg..    OOnnee  pprroojjeecctt  ooffffiicceerr  ttoolldd  uuss  
tthhaatt  CCDDEERR  uusseess  ccoonnttrraaccttoorrss  ttoo  ffiillll  iittss  oonnggooiinngg  nneeeedd  ffoorr  IITT  ppeerrssoonnnneell  ttoo  
ppeerrffoorrmm  aa  vvaarriieettyy  ooff  ttaasskkss  rreellaatteedd  ttoo  ooppeerraattiioonnss  aanndd  mmaaiinntteennaannccee..    TThhee  
pprroojjeecctt  ooffffiicceerr  aallssoo  ssttaatteedd  tthhaatt  CCDDEERR  pprreevviioouussllyy  ppeerrffoorrmmeedd  tthheessee  ttaasskkss  
wwiitthh  iittss  oowwnn  ssttaaffff..      
CCDDEERR  aallssoo  aaccqquuiirreedd  IITT  sseerrvviicceess  tthhrroouugghh  tthhrreeee  ggoovveerrnnmmeennttwwiiddee  
aaccqquuiissiittiioonn  oorrddeerrss  ppllaacceedd  tthhrroouugghh  iinntteerraaggeennccyy  aaggrreeeemmeennttss..    CCDDEERR  
ooffffiicciiaallss  ttoolldd  uuss  tthhaatt  tthheeyy  uusseedd  iinntteerraaggeennccyy  aaggrreeeemmeennttss  pprriimmaarriillyy  
bbeeccaauussee  tthhee  aaggeennccyy  ccaannnnoott  ppeerrffoorrmm  ccoonnttrraaccttoorr  sseelleeccttiioonn  ggiivveenn  iittss  ttiimmee  
aanndd  ppeerrssoonnnneell  ccoonnssttrraaiinnttss..    IInn  oonnee  iinnssttaannccee,,  FFDDAA  rreecceeiivveedd  aa  
ccoonnggrreessssiioonnaall  mmaannddaattee  ttoo  bbuuiilldd  aa  ddaattaabbaassee..    CCDDEERR  rreelliieedd  oonn  fflleexxiibbllee  
aaccqquuiissiittiioonn  mmeetthhooddss  ttoo  ffiillll  tthhee  nneeeedd  qquuiicckkllyy..    UUnnddeerr  tthheessee  
cciirrccuummssttaanncceess,,  tthhee  aaggeennccyy  hhaadd  lliittttllee  ttiimmee  ttoo  ssoolliicciitt  aanndd  rreevviieeww  bbiiddss  ffrroomm  
ccoonnttrraaccttoorrss..  
CCDDEERR  rreelliieedd  oonn  ttiimmee--aanndd--mmaatteerriiaallss  ccoonnttrraacctt  aaccttiioonnss  tthhaatt  iinnccrreeaassee  rriisskk  ffoorr  tthhee  
GGoovveerrnnmmeenntt  
TTwweennttyy--ssiixx  ooff  ttwweennttyy--eeiigghhtt  ccoonnttrraacctt  aaccttiioonnss  rreevviieewweedd  wweerree                              
ttiimmee--aanndd--mmaatteerriiaallss  ccoonnttrraacctt  aaccttiioonnss..    TThhee  FFAARR  ssttaatteess  tthhaatt                                
ttiimmee--aanndd--mmaatteerriiaallss  ccoonnttrraaccttss  pprroovviiddee  nnoo  iinncceennttiivvee  ffoorr  tthhee  ccoonnttrraaccttoorrss  ttoo  
ccoonnttrrooll  ccoossttss  oorr  iinnccrreeaassee  llaabboorr  eeffffiicciieennccyy  aanndd,,  tthheerreeffoorree,,  sshhoouulldd  bbee  uusseedd  
oonnllyy  wwhheenn  nnoo  ootthheerr  ccoonnttrraaccttiinngg  mmeetthhoodd  iiss  ssuuiittaabbllee..3366    CCDDEERRss  rreelliiaannccee  
oonn  ttiimmee--aanndd--mmaatteerriiaallss  ccoonnttrraaccttss  sshhiiffttss  ffiinnaanncciiaall  rriisskk  oonnttoo  tthhee  
GGoovveerrnnmmeenntt  aanndd  ppllaacceess  aa  ggrreeaatteerr  bbuurrddeenn  oonn  tthhee  aaggeennccyy  ttoo  ccoonnttrrooll  
ccoossttss..3377      
FFuurrtthheerrmmoorree,,  CCDDEERR  eexxtteennddeedd  2244  ooff  2266  ttiimmee--aanndd--mmaatteerriiaallss  ccoonnttrraacctt  
aaccttiioonnss  uussiinngg  ccoonnttrraacctt  ooppttiioonnss  oorr  mmooddiiffiiccaattiioonnss..    TThhee  FFAARR  ssttaatteess  tthhaatt  
ccoonnttrraaccttiinngg  ooffffiicceerrss  sshhoouulldd  aavvooiidd  pprroottrraacctteedd  uussee  ooff  aa                                                    
ccoosstt--rreeiimmbbuurrsseemmeenntt  oorr  ttiimmee--aanndd--mmaatteerriiaallss  ccoonnttrraacctt  aafftteerr  eexxppeerriieennccee  
pprroovviiddeess  aa  bbaassiiss  ffoorr  ffiirrmmeerr  pprriicciinngg..3388    WWee  ssaaww  nnoo  eexxaammpplleess  iinn  oouurr  
rreevviieeww  iinn  wwhhiicchh  CCDDEERR  nneeggoottiiaatteedd  ffiirrmmeerr  pprriicciinngg  ffoorr  iittss  ccoonnttrraacctt  aaccttiioonnss  
oovveerr  ttiimmee..    
  
  
  
3366  FFAARR    1166..660011((cc))..  
37 Ibid.,  16.601(c)(1).  If the Government is not satisfied with the work performed by the 
contractor, the Government may ask the contractor to remedy the deficiencies but must pay 
the hourly rate (minus the portion that is profit) until the work is completed.                   
FAR  52.212-4(a)(4). 
38 Ibid.,  16.103(c). 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  12   
  
   
F I N D I N G S  
 
CDER may not achieve the benefits of performance-based acquisitions 
CDER characterized 20 of 28 contract actions as performance-based 
acquisitions, but most of these contract actions did not include 
measurable performance standards and only one included a 
performance incentive plan.  The FAR requires that performance-based 
contracts contain a statement of work focused on the agencys desired 
outcomes, measurable performance standards, and a performance 
incentive plan.39  Performance incentives provide additional funds to 
the contractor for achieving measurable goals.   
In fact, 19 of the 20 performance-based contract actions identified were     
time-and-materials contract actions.  Because they provide no incentive 
for the contractor to control costs or increase labor efficiency,                        
time-and-materials contract actions may undermine the benefits of 
performance-based acquisition. 
Even when contract actions included measurable performance 
standards, CDER used them inconsistently.  In several contract actions, 
CDER included measurable performance standards, such as the amount 
of time needed to resolve help desk issues or hours of operation.  
However, the same actions included standards that were simply lists of 
deliverables with no measure of quality.  One project officer stated that 
measurable performance standards do not always readily apply to IT 
services, such as project management and maintenance and operations.  
CDERs lack of clear performance measures may be related to the lack 
of clear work requirements that we referred to previously. 
Furthermore, in the one contract action for which CDER used a 
performance incentive plan, it relied on largely subjective performance 
elements, such as the extent to which contractor personnel are 
prepared for meetings and briefings and whether work is performed 
efficiently with the correct skill mix.   
Because CDER did not clearly 
CDER used quality assurance and      
define its requirements or 
monitoring plans inconsistently  performance measures, it also 
did not consistently establish 
QA plans.  QA plans state how and when an agency will evaluate the 
contractors performance against established performance measures.  
When the agency monitors the contractor according to the QA plan, it 
 
39 Ibid.,  37.601(b). 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  13   
  
  FF II  NN DD II NN GG SS   
protects taxpayer funds by holding the contractor accountable for its 
performance.   
Twenty-one of twenty-eight contract actions reviewed did not have  
documented QA plans.  Of the seven contract actions that included QA 
plans, three contained identical plans with generic language calling for 
100-percent inspection of deliverables using the same checklist of 
qualitative measures.  For two of these three contract actions, the 
project officers told us that they did not use the plans within their 
respective statements of work.   
Without documented QA plans to guide contractor monitoring, CDERs 
monitoring appears to focus more on day-to-day tasks than on 
measuring the quality of the contractors performance.  For example, 
one contract action without a QA plan contained monitoring 
documentation consisting of status reports with a breakdown of the 
number of hours that the contractor worked on different IT systems.  
The project officer told us that he reviewed the status reports for billing 
purposes.  Several project officers stated that because contractors often 
work in the same office as CDER staff, monitoring often consists of 
informal discussions, e-mails, and ad hoc meetings.  
The FAR generally provides agencies with discretion when monitoring 
contracts.  However, the FAR also considers time-and-materials 
contracts to be high-risk contracts that require monitoring 
commensurate with the risk.  As noted earlier, the majority of the 
contract actions reviewed were time-and-materials.   
 
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  14   
  
   
 R E C O M M E N D A T I O N S  
 
CDER is responsible for ensuring that drugs marketed within the 
United States are safe and effective.  In keeping with this mission, it is 
critical that CDER procure IT systems and services that meet its needs 
in a cost-effective manner while complying with relevant acquisition 
regulations.  We acknowledge that Federal IT contracting presents 
unique challenges for acquisition personnel and project managers. 
Although the IT contract actions reviewed were generally compliant 
with the FAR, several areas of concern exist with CDERs IT planning 
process and its contract monitoring.  We found that CDER used broad 
language to describe requirements in its statements of work, relied 
primarily on acquisition methods that emphasize speed and flexibility 
over planning, relied on time-and-materials contract actions that 
increase financial risk to the Government, and may not achieve the 
benefits of performance-based acquisitions.  We also found that CDER 
used QA and monitoring plans inconsistently.  The AAP report of 2007 
found the same problems throughout the Federal Government.         
FDAs Office of Information Management absorbed CDER OIT at the 
end of FY 2008.  Although CDER OIT no longer exists as a separate 
entity, we identified several steps that FDA should take to minimize its 
contract risk.  FDA should:   
Define IT Requirements More Clearly 
FDA should revise its planning processes to define IT requirements in 
greater detail.  Defining requirements more clearly may lead to 
additional contracting options, such as the use of fixed-price contracts 
with performance incentives.   FDA could create greater efficiencies in 
contractor selection and project management as well. 
Convert Ongoing Time-and-Materials Contract Actions to Fixed-Price 
Contract Actions When Appropriate 
Although the flexibility of time-and-materials contract actions gives 
FDA access to a range of contractor expertise when designing a new IT 
system, this contract type shifts financial risk onto the Government and 
may not represent the best value for ongoing operations and 
maintenance functions.  Converting ongoing time-and-materials 
contract actions to fixed-price contract actions would reduce the 
financial risk borne by the Government and may allow FDA to obtain 
the same services at a reduced cost.  In addition, converting  
  OEI-01-07-00450  MANAGEMENT OF INFORMATION TECHNOLOGY CONTRACTS AT FDAS CDER  15   
  
   
R E C O M M E N D A T I O N SS   
ttiimmee--aanndd--mmaatteerriiaallss  ccoonnttrraacctt  aaccttiioonnss  ttoo  ffiixxeedd--pprriiccee  ccoonnttrraacctt  aaccttiioonnss  wwoouulldd  
aallssoo  rreedduuccee  tthhee  aammoouunntt  ooff  oovveerrssiigghhtt  nneeeeddeedd  ttoo  eennssuurree  llaabboorr  eeffffiicciieennccyy..      
UUssee  PPeerrffoorrmmaannccee  IInncceennttiivvee  PPllaannss  WWhheenn  AApppprroopprriiaattee      
FFDDAA  ccoouulldd  aacchhiieevvee  mmaannyy  bbeenneeffiittss  ffrroomm  tthhee  pprrooppeerr  uussee  ooff                        
ppeerrffoorrmmaannccee--bbaasseedd  aaccqquuiissiittiioonnss,,  ssuucchh  aass  ccoommppeettiittiivvee  pprriicciinngg,,  iinnnnoovvaattiivvee  
ssoolluuttiioonnss,,  qquuaalliittyy  sseerrvviicceess,,  aanndd  rreessuullttss  tthhaatt  ssuuppppoorrtt  aaggeennccyy  mmiissssiioonnss..    
UUssee  ooff  ppeerrffoorrmmaannccee  iinncceennttiivveess  ccoouulldd  aallllooww  FFDDAA  ttoo  rreedduuccee  ccoonnttrraacctt  ccoossttss  
bbyy  ttyyiinngg  tthhee  ccoonnttrraaccttoorrss  pprrooffiitt  oorr  aawwaarrdd  ffeeeess  ttoo  qquuaannttiiffiiaabbllee  
ppeerrffoorrmmaannccee  ssttaannddaarrddss..  
UUssee  DDooccuummeenntteedd  QQAA  PPllaannss    
QQAA  ppllaannss  ssttaattee  hhooww  aanndd  wwhheenn  aann  aaggeennccyy  wwiillll  eevvaalluuaattee  tthhee  ccoonnttrraaccttoorrss  
ppeerrffoorrmmaannccee  aaggaaiinnsstt  eessttaabblliisshheedd  ppeerrffoorrmmaannccee  mmeeaassuurreess..    IImmpplleemmeennttiinngg  
ffoorrmmaall  QQAA  ppllaannss  iinn  iittss  ccoonnttrraacctt  aaccttiioonnss  wwoouulldd  aallllooww  FFDDAA  ttoo  iiddeennttiiffyy  
sseerrvviicceess  tthhaatt  ddoo  nnoott  mmeeeett  tthhee  ddeeffiinneedd  rreeqquuiirreemmeennttss  aanndd  ccrreeaattee  aa  
mmeecchhaanniissmm  ffoorr  ccoonnttrraaccttoorr  aaccccoouunnttaabbiilliittyy..  
AAGGEENNCCYY  CCOOMMMMEENNTTSS  AANNDD  OOFFFFIICCEE  OOFF  IINNSSPPEECCTTOORR  GGEENNEERRAALL  
RESPONSE
 
FDA agreed with three of our four recommendations and identified 
steps it is taking to implement them.  It also noted that its 
organizational restructuring in FY 2008 centralized IT resources and 
created new processes for acquisition planning. 
FDA neither agreed nor disagreed with our first recommendation to 
define its IT requirements more clearly.  However, it did identify actions 
it is taking that support that recommendation.  Specifically, FDA 
reported that it is implementing new processes during the early stages 
of acquisition planning to better coordinate its IT systems and create 
efficiencies across FDA.  These processes are intended to assist in 
defining requirements. 
In addition, FDA agreed with our recommendations to convert         
time-and-materials contracts to fixed-price contracts when appropriate 
but noted that fixed-price contracts are most effective for acquisitions in 
which requirements are clear, such as those for hardware and 
commercial off-the-shelf software.  Finally, FDA agreed with our 
recommendations to use performance incentive plans and quality 
assurance plans, stating that it will use these methods in future 
contracts when applicable.  
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R E C O M M E N D A T I O N S  
We ask that in its final management decision, FDA more clearly 
indicate whether it concurs with our first recommendation and what 
steps it will take to implement it. 
For the full text of FDAs comments, see Appendix C. 
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 A P P E N D I X ~ A  
Glossary of Abbreviations, Acronyms, and Contracting Terms 
 
Acquisition Advisory Panel (AAP).  The Services Acquisition Reform Act 
of 2003 created AAP to review Federal acquisition laws and regulations 
and make recommendations to improve contracting practices, 
particularly regarding commercial and performance-based acquisitions. 
Blanket Purchase Agreement (BPA).  Rather than issue new contracts, 
agencies may place delivery orders under a BPA to fill recurring needs 
for supplies or services. 
Federal Acquisition Regulation (FAR).  The FAR is the primary set of 
regulations governing Federal contracting. 
Federal Procurement Data System (FPDS).  The FPDS is an online 
database that captures basic information on Government contracts, 
such as the purchasing agency, contractor name, and contracted dollar 
amount, and indicates whether the contract was awarded competitively. 
Federal Supply Schedule (FSS).  The FSS is one type of Multiple Award 
Schedule operated by the General Services Administration.  It is a list of 
prenegotiated Government contracts for commonly used commercial 
items and services that Federal agencies and other entities may use. 
Government-Wide Acquisition Contract (GWAC).  The Clinger-Cohen Act 
established GWACs for the streamlined acquisition of information 
technology (IT) services and products. 
Performance-Based Acquisition (PBA).  The PBA is the Governments 
preferred method of service contracting according to the FAR.  PBA 
states the Governments desired outcomes and allows the contractor to 
decide how the work will be done to achieve those outcomes. 
Options.  An option is a unilateral right in a contract by which the 
Government may choose to purchase additional supplies or services or 
extend the term of the contract.  Contracting officers may include 
options in contracts when they are in the Governments interest. 
Risk.  Risk refers to the possibility that a contract will not be fulfilled at 
the agreed-upon price.  For example, if the Government agrees to pay a 
contractor a fixed price to build an IT system, the contractor earns 
additional profit only if it can build the IT system at a cost less than the 
fixed price.  Thus, the contractor assumes the financial risk.   
Small Business Contracting Goals.  The FAR requires the Government 
to provide contracting opportunities to small businesses, those owned by 
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A P P E N D I X ~ A  
veterans and women, those in economically underutilized areas, and 
those owned by other groups that may be at a disadvantage when 
competing for contracts.  The annual small business goal for all 
governmentwide prime contract dollars is 23 percent.  Agencies must 
report their small business contract awards through the FPDS. 
 
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 A P P E N D I X ~ B  
Legal Authorities Governing Federal Acquisitions 
 
Assisted Acquisition.  48 CFR  4.601 (definition of assisted acquisition) 
Blanket Purchase Agreements (BPA).  48 CFR  8.405-3(a) (BPAs under 
Multiple Award Schedule (MAS)/Federal Supply Schedule (FSS) 
contracts); 48 CFR  13.303 (stand-alone BPA) 
Competition Requirements.  48 CFR ch. 1, Part 6; 48 CFR ch. 1, subpart 
8.4 (FSS competition requirements); 48 CFR  16.505 (multiagency 
contracts competition requirements) 
Evaluation Factors.  48 CFR  15.303(b)(94) (negotiated contracts);       
48 CFR  14.201-5(c) (sealed bid contracts); 48 CFR  13.106-1 
(simplified acquisitions) 
Federal Acquisition Regulation Authority and Applicability.  41 U.S.C.      
 405(a); 48 CFR  1.104; 48 CFR  2.101 (definition of acquisition) 
Federal Procurement Data System (FPDS).  48 CFR ch. 1, subpart 4.6  
FSS Contracts (also known as MAS contracts).  41 U.S.C.  259(b)(3);        
48 CFR  8.404(a); 48 CFR  6.102(d)(3) 
Multiagency Contracts (MAC) and Governmentwide Acquisition Contracts 
(GWAC).  41 U.S.C.  253h and 253k (MAC); 41 U.S.C.                                      
 11314(a)(2) (GWAC); 48 CFR  2.101 (definition of MAC and GWAC) 
Option.  48 CFR  2.101 (definition of option); 48 CFR  17.202 (option 
inclusion and exercise) 
Performance-Based Acquisitions (PBA).  Floyd Spence National Defense 
Authorization Act FY 01, P.L. No. 106-398,  821 (Oct. 30, 2000);          
48 CFR  2.101 (definition of PBA); 48 CFR  37.102(a); 48 CFR  37.601 
Quality Assurance Requirements.  48 CFR, subpart 46.4; 48 CFR             
 16.601(b)(1) (time-and-materials contracts-related Government 
surveillance requirement) 
Small Business Governmentwide Goal.  15 U.S.C.  644(g)(1) (annual 
goal for prime contracts across Government)   
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 A P P E N D I X   C  
 
Agency Comments 
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A P P E N D I X   ~   C  
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A P P E N D I X   ~   C  
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 A C K N O W L E D G M E N T S  
 
This report was prepared under the direction of Joyce M. Greenleaf, 
Regional Inspector General for Evaluation and Inspections in the 
Boston regional office, and Russell W. Hereford, Deputy Regional 
Inspector General.   
Christopher Galvin served as the team leader for this study.  Other 
principal Office of Evaluation and Inspections staff from the Boston 
regional office who contributed to the report include Melissa Hafner and 
Rose Lichtenstein; central office staff who contributed include Mark 
Richardson and Matthew McMullen.  
 
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