Audit Report 

OIG-05-002 (Interim Report) 

MANUFACTURING OPERATIONS: Mint’s Standard A-76 

Competition Study for the Preparation of Ready-to-Coin 

Planchets Is Delayed and Requires Significant Actions to 

Complete 

October 29, 2004 

Office of 

Inspector General 

Department of the Treasury 

Contents 

MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

Study for the Preparation of Ready-to-Coin Planchets Is Delayed and 

Requires Significant Actions to Complete (OIG-05-002) 

Page 1 

Audit Report.................................................................................................. 3 

 Results in Brief...............................................................................................5 

 Background ................................................................................................. 5 

 Findings and Recommendations ..................................................................... 8 

The Mint Did Not Complete the BAU 

Competition Study in a Timely Manner ....................................................... 8 

Draft Performance Work Statements for the 

Competitive Study Were Deficient .............................................................11 

 

The Mint’s Decisions to Offer or Not Offer GFP 

Were Not Justified in Writing or Approved by the CSO .............................. 17 

 

Potential Conflicts of Interest by Mint Officials and Staff 

Involved in the Mint’s A-76 Process Need to be Addressed......................... 18 

Appendices

 Appendix 1: Objectives, Scope, and Methodology ...................................... 22 

 Appendix 2: Detailed Competitive Sourcing Study Schedule for BAU ............ 24 

 Appendix 3: Draft Solicitation Released August 14, 2004 

 Comparison of Cupronickel and Clad Blank 

 Specifications in TE-10 and TE-02....................................... 25 

 Appendix 4: Management Comments........................................................ 26 

 Appendix 5: Major Contributors To This Report .......................................... 29 

 Appendix 6: Report Distribution................................................................ 30 
Contents 

MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

Study for the Preparation of Ready-to-Coin Planchets Is Delayed and 

Requires Significant Actions to Complete (OIG-05-002) 

Page 2 

Tables

Table 1 April Draft PWS Comparison of Blank Specifications in TE-02 

with Inspection Criteria in TE-08........................................ 14 

Table 2 August Draft Solicitation Comparison of Blank Specifications in 

TE-02 with Inspection Criteria in TE-08 .............................. 15 

Abbreviations

 

 ATO Agency Tender Official 

 BAU Blanking, Annealing, and Upsetting 

 Bidder Potential Contractors/Offerors 

 Circular OMB Circular N. A-76 (Revised) 

 CO Contracting Officer 

 COTR Contracting Officer’s Technical Representative 

 CSG Competitive Sourcing Group 

 CSO Competitive Sourcing Official 

 FAR Federal Acquisition Regulation 

 GFE Government Furnished Equipment 

 GFP Government Furnished Property 

 Mint United States Mint 

 MEO Most Efficient Organization 

 OIG Office of Inspector General 

 OMB Office of Management and Budget 

 P.L. Public Law 

 PWS Performance Work Statement 

 QASP Quality Assurance Surveillance Plan 

 SOW Statement of Work 

 TEs Technical Exhibits 

 

 
OIG Audit 

Report

The Department of the Treasury 

Office of Inspector General 

MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

Study for the Preparation of Ready-to-Coin Planchets Is Delayed and 

Requires Significant Actions to Complete (OIG-05-002) 

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 October 29, 2004 

 Henrietta Holsman Fore 

Director 

United States Mint 

 

Office of Management and Budget (OMB) Circular No. A-76 

(Revised) [Circular], Performance of Commercial Activities, which 

was revised May 29, 2003, reiterates the longstanding policy of 

the federal government to rely on the private sector for needed 

commercial services. In general, the Circular requires that federal 

agencies identify activities performed by government personnel as 

either commercial1

 or inherently governmental.2 Agencies are then 

to use a “streamlined” or “standard” competition to determine if 

government personnel should perform a commercial activity. On 

October 23, 2003, the United States Mint (Mint) issued a Public 

Announcement of OMB Circular A-76 Standard Competition Study 

on United States Mint Preparation of Ready-to-Coin Planchets 

involving the manufacturing processes of blanking, annealing, and 

upsetting (BAU) of coin blanks. Under the Circular a standard 

competition study is to be completed and a “performance decision” 

made within 12 months. Therefore, the BAU competition study 

performance decision whether or not to contract out these 

manufacturing processes to the private sector or continue 

performing them with Mint personnel was due by 

October 23, 2004. 

The House Conference Report (H.R. 108-401) for the Consolidated 

Appropriations Act, 2004 [Public Law (P.L.)108-199], directed our 

 

1

 A commercial activity is a recurring service that could be performed by the private sector. 2

 An inherently governmental activity is so intimately related to the public interest as to mandate 

performance by government personnel. 
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office to perform a study on the potential and cost-effectiveness of 

expanded use of coin blanks in the production of circulating coins 

and submit a report on our study to the House and Senate 

Committees on Appropriations by April 1, 2004. In letters dated 

March 23, 2004, we informed the Congress that since the Mint 

had already publicly announced the BAU competition study, the 

study as described in the Conference Report could not be 

performed. However, we advised that we had initiated an audit to 

determine whether the Mint was conducting the BAU competition 

study in accordance with OMB requirements and Mint policies, and 

that we expected to complete this audit by October 31, 2004. 

As discussed in this Interim Audit Report, the Mint has not met 

certain critical intermediate milestones it established for the BAU 

competition and did not complete the study in October 2004. We 

also noted deficiencies in other aspects of the Mint’s BAU 

competitive study that require corrective action as the study 

progresses. We are therefore issuing this report to provide Mint 

management, the Department of the Treasury Competitive 

Sourcing Official (CSO), and the Congress with our audit results to 

date and recommendations to address these matters. We plan to 

continue our audit of the Mint’s BAU competition study and will 

issue additional interim reports as appropriate and a final report 

after the study concludes. The findings in this report are based on 

our work performed from February 2004 to October 2004 at the 

Mint’s headquarters in Washington, D.C., and Philadelphia Mint 

production facility. A more detailed description of our objectives, 

scope, and methodology is provided in Appendix 1. 

Pursuant to H.R. 108-401, we will be providing copies of this 

Interim Audit Report to the House and Senate Committees on 

Appropriations as well as to the other Congressional oversight 

committees for the Department of the Treasury listed in 

Appendix 6. 
MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

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Requires Significant Actions to Complete (OIG-05-002) 

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Results in Brief

We found that (1) the Mint missed certain critical intermediate 

steps and milestone dates for completing the BAU competition 

study and accordingly, did not complete the study within the 

12-month timeframe required by the Circular; (2) draft performance 

work statements (PWS) prepared by the Mint included inconsistent 

BAU manufacturing specifications and inspection criteria; (3) the 

Mint did not prepare the required justification for its decisions 

regarding Government Furnished Property (GFP) to be offered to 

potential contractors/offerors (bidders); and (4) potential conflicts 

of interest by Mint officials and staff involved in the Mint’s A-76 

process existed. 

We are making five recommendations in this report. Specifically, 

the Mint should (1) inform the Assistant Secretary for Management 

and Chief Financial Officer, the Department’s CSO, that the BAU 

competition study was not completed within 12 months; 

(2) establish achievable intermediate steps and milestones for the 

study going forward; (3) ensure that manufacturing and inspection 

criteria in the PWS are consistent; (4) determine, and appropriately 

justify, whether government furnished property will be offered in 

the PWS; and (5) assign responsibilities for competitive studies and 

annual inventories of inherently governmental and commercial 

activities consistent with the Circular’s requirements. 

In the Mint’s October 27, 2004, written response to this report, 

management agreed with the findings and recommendations and 

provided its corrective actions taken and planned to implement the 

recommendations. The full text of the Mint’s response is provided 

as Appendix 4. 

 

Background

The Circular establishes federal policy for the competition of 

commercial activities. The Circular assigns responsibilities to 
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specific government personnel and identifies additional 

requirements such as the requirements in the Federal Acquisition 

Regulation (FAR) that are applicable to a competition conducted 

under the Circular. Some specific requirements are that agencies: 

• Inventory all activities performed by government personnel 

as either commercial or inherently governmental; 

• Perform a Public-Private Competition to determine if 

government personnel should perform a commercial activity; 

• Apply the FAR, in conjunction with this Circular, for 

streamlined and standard competitions and comply with 

procurement integrity, ethics, and standards of conduct 

rules; 

• Designate, in writing, an assistant secretary or equivalent 

level official with responsibility for implementing this 

Circular, hereafter referred to as the CSO. For the BAU 

competitive study, the CSO is the Assistant Secretary for 

Management and Chief Financial Officer of the Department 

of the Treasury. Except as otherwise provided by this 

circular, the CSO may delegate, in writing, specified 

responsibilities to senior-level officials in the agency or 

agency components; and 

• Post on SHARE A-76 lessons learned and best practices 

resulting from a competition process. 

Key personnel in the OMB A-76 process include: 

• The Agency Tender Official (ATO) is an inherently 

governmental agency official with decision-making authority 

and responsible for the agency tender, leads the Most 

Efficient Organization (MEO), and represents the agency 

tender during source selection. 
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• The CSO is an inherently governmental agency official 

responsible for the implementation of this circular within the 

agency. 

• The Contracting Officer (CO) is an inherently governmental 

agency official participating on the PWS team and is 

responsible for the issuance of the solicitation and the 

source selection evaluation methodology. 

• The MEO Team is a group of individuals, comprised of 

technical and functional experts, and formed to assist the 

ATO in developing the agency tender. 

• The PWS Team, led by a team leader, is responsible for 

developing the PWS, determining whether or not to offer 

GFP, assisting the CO with the solicitation, developing the 

quality assurance surveillance plan, and implementing the 

performance decision. 

For the BAU competition study the Mint estimated that 

approximately $771,800 has been obligated of which 

approximately $535,600 has been expended as of 

October 25, 2004.3

 The Mint is using two contractors to support 

the PWS and MEO teams.4

 The portion of the contract award 

amounts allocated by the Mint to the BAU competition study is 

approximately $349,400 of which $113,200 has been paid to the 

contractors. The Mint estimated that its salaries and benefits, 

travel, and training costs totaled approximately $422,400 for the 

BAU competition study.5

 

3

 P.L. 108-199 requires federal agencies to annually report to the Congress on competitive sourcing 

activities, including incremental costs attributable to completed and in-process competition studies. The 

first report covering fiscal year 2004 is due December 31, 2004. 

4

 Each contract and contractor supported two competition studies. One study was for the Power 

Industrial Truck and the other study was for the BAU. The Mint allocated 50 percent of the contract 

costs, obligated and expended, to each study in the above estimates. 

5 The Mint’s estimated costs are unaudited and did not include all travel costs. We were informed that 

the travel costs for the Philadelphia Mint employees were not available at the time this report is issued. 
MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

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Requires Significant Actions to Complete (OIG-05-002) 

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Findings and Recommendations 

Finding 1 The Mint Did Not Complete the BAU Competition Study 

in a Timely Manner 

Contrary to the Circular’s requirements, the Mint did not meet the 

12-month timeframe for completing the BAU competitive study. It 

missed certain critical intermediate milestones established for the 

study, particularly those related to developing an adequate PWS. 

Although the Mint could have requested CSO approval for a longer 

competition period before publicly announcing the competition, it 

did not do so nor demonstrate that a longer period was necessary. 

The Circular requires that a standard competition not exceed 12 

months from public announcement (start date) to performance 

decision (end date) unless the CSO grants a waiver. The CSO may 

grant a time limit waiver, in writing, allowing up to 18 months for 

the competition if the competition is particularly complex. The 

time limit waiver, however, is to be provided to OMB before the 

competition is publicly announced. Additionally, OMB must be 

notified by the CSO if the agency exceeds the time limit, including 

any approved extension. 

The Mint developed a schedule, provided to our auditors in 

February 2004 and included as Appendix 2, that identified the key 

intermediate steps and milestone target dates that would provide 

for completion of the BAU competition study by 

September 10, 2004, or approximately 101⁄2 months after the 

study was publicly announced. Although the schedule provided a 

cushion of 11⁄2 months, significant slippage occurred with meeting 

intermediate steps and milestone dates. For example, the schedule 

provided for the following intermediate milestones and milestone 

target dates: 
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Intermediate Milestones Milestone Target Date 

Post Final Draft PWS and Quality 

Assurance Surveillance Plan (QASP) on 

FedBizOpps.gov for comment 

 

 

March 31, 2004 

Final PWS and QASP complete May 19, 2004 

Mint issues Solicitation via 

FedBizOpps.gov 

 June 2, 2004 

Receive Tenders from Providers August 11, 2004 

Complete Source Selection September 6, 2004 

Public Announcement of Award September 10, 2004 

With respect to the PWS, the Mint issued the draft PWS for 

comment on April 12, 2004, and a draft solicitation6 including a 

revised draft PWS on August 14, 2004, 4 months late and after 

the milestone date initially established for issuing the solicitation 

for tenders. As discussed in Finding 2, both draft PWS documents 

were deficient. At September 29, 2004, the Mint had also not 

made fundamental decisions concerning GFP to be offered in the 

PWS. According to an experienced contractor hired by the Mint to 

assist with the process outlined in the Circular, the decision to 

offer or not offer GFP will likely now add 30 to 60 more days to 

the entire process. 

Mint personnel told our auditors that they considered the BAU 

competition to be complex. However, the Mint did not seek a time 

limit waiver from the CSO as allowed by the Circular. By virtue of 

establishing a schedule that was intended to complete the 

competition in 101⁄2 months, management has not demonstrated 

 

6 For the remainder of the report we will refer to this document as a draft PWS.
MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

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that this study was unusually complex and warranted a longer 

period for its completion. 

Recommendations

The Mint Director should: 

1. Formally notify the Competitive Sourcing Official (Assistant 

Secretary for Management and Chief Financial Officer) of the 

delay in completing the BAU competition. 

Management Response The Mint agrees with this 

recommendation. The Mint is currently drafting a notification, 

which will be forwarded to the CSO no later than 

November 12, 2004. 

OIG Comment The actions proposed by the Mint satisfy the 

intent of our recommendation. 

2. Develop an achievable schedule for completing the BAU 

competitive study going forward. Adherence to the schedule 

should be closely monitored by senior Mint management and 

timely action taken to address any slippages. 

Management Response The Mint agrees with this 

recommendation. The Mint is currently drafting a new schedule 

that they believe is achievable. The Mint stated that the new 

schedule will be forwarded to the CSO no later than 

November 12, 2004. 

OIG Comment The actions proposed by the Mint satisfy the 

intent of our recommendation. 
MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

Study for the Preparation of Ready-to-Coin Planchets Is Delayed and 

Requires Significant Actions to Complete (OIG-05-002) 

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Finding 2 Draft Performance Work Statements for the Competition 

Study Were Deficient 

The draft PWSs published by the Mint included different 

specifications for the manufacturing of the coin blanks than the 

specifications for inspection/acceptance of the blanks. If not 

corrected in the final solicitation, this deficiency could discourage 

potential bidders in that a significant number of coin blanks 

produced would be subject to rejection by the Mint. 

The PWS is a document defining specific results or outcomes 

derived from the commercial activity and providing the 

requirements, performance measures, standards, workload, 

conditions of performance, and timeframes. The PWS should state 

“What is to be performed” but not include detailed procedures that 

dictate how the work is to be accomplished. Finally, the PWS 

should ensure completeness by: 

• Identifying and defining all products or tasks, 

• Identifying completion criteria for each product or task, 

• Identifying any relationships between products or tasks, 

• Excluding unnecessary tasks, 

• Identifying the flow of the tasks, and 

• Exclude how-to requirements. 

On April 12, 2004, the Mint posted its draft PWS for the BAU 

competition study on FedBizOpps.gov for comments and questions. 

On August 14, 2004, the Mint posted its draft solicitation, which 

included a revised draft PWS, on FedBizOpps.gov. The April 2004 

draft PWS contained the following Technical Exhibits (TEs) which 

provide detailed and technical information in support of the 

production of the coin blanks: TE-01, TE-02, TE-03, TE-04, TE-05, 

TE-06, TE-07, and TE-08. The August 2004 draft PWS included 

the same TEs, except TE-07, as were published in the April 2004 

draft PWS, plus two additional ones -- TE-09 and TE-10. The TEs 

provide the following information: 
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TEs7

 included in the April 2004 and August 2004 draft PWSs

• TE-01, Workload – Blanks Produced, is the number of blanks 

produced each month and production forecasts by fiscal year. 

• TE-02, Blank Specifications, is the individual blank 

denominations’ production dimensions and specifications. 

• TE-03, Coils Received, is the monthly historical delivery 

quantities of the strip material that is the raw material for blank 

production for Calendar Year 2003. 

• TE-04, Historical Maintenance Repair, is a list of problems and 

locations for equipment that the Mint is offering as Government 

Furnished Equipment (GFE). 

• TE-05, Maintenance Problem Code Explanation, is the code 

descriptions for maintenance problems with GFE. 

• TE-06, Government Furnished Equipment, is a listing of the 

equipment offered by the Mint as GFE. 

• TE-07, Performance Requirements Summary, is a summary of 

the PWS requirements; performance standards; maximum 

allowable defect rate per sample; and method of surveillance, 

which is either inspection or sampling. 

• TE-08, Inspection and Acceptance, is the criteria the Mint uses 

to inspect blanks to determine whether they are acceptable or 

unacceptable for use in the production of coins. 

Additional TEs included in the August 2004 draft PWS

• TE-09, Authorized Coin Carriers, is a listing of the carriers 

approved to transport blanks from the manufacturers’ facilities 

and the Mint’s production facilities. 

• TE-10, Incoming Coil Inspection Specifications, is the Mint’s 

specifications used to determine whether the coils received 

from the strip manufacturing contactors are acceptable or 

unacceptable for use in the production of blanks. 

 

7

 The names of the TEs varied between the Table of Contents, the label on the TE and between the 

draft PWSs. For TE-01 to TE-08 we used the title in the April draft PWS Table of Contents and for 

TE-09 and TE-10 we used the labels on the TEs. 
MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

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We reviewed the April 2004 draft PWS and noted two 

weaknesses. The first weakness concerned the use in several 

places in the PWS of the terms ‘adequate’ and ‘satisfactory’ as 

requirements or performance standards. These terms were not 

defined in the draft PWS and the terms were used to measure 

different subject matters. 

A second weakness concerned differences between various 

attributes from the Blank Specifications contained in TE-02 

(manufacturing specifications) and the inspection criteria for 

planchet blanks contained in TE-08. These TEs contained the 

manufacturing specifications and inspection criteria, respectively, 

for five coin denominations – nickel, dime, quarter, half, and dollar. 

The TEs provide the dimensional tolerances in inches and 

millimeters for each coin denomination in four categories – strip 

gauge (blanking gauge), blank cut diameter (blanking diameter), 

upset diameter (rimming or upsetting diameter), and upset edge 

thickness (rimming or upsetting thickness). 

We compared the Mint’s 20 manufacturing specifications with its 

inspection criteria for the five coin denominations. For 7 of the 20 

specifications (35 percent), the inspection criteria for coin/blank 

acceptance were different. For two coin denominations (nickels 

and quarters), there was no overlap between the manufacturing 

specifications and inspection criteria, which would effectively result 

in rejection of all coins produced of those denominations. For two 

other coin denominations (dime and dollar), the discrepancies were 

not as significant but could still result in some of the coins 

produced according to the manufacturing specifications to be 

rejected. These discrepancies are identified in the following table: 
MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

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Table 1: Manufacturing Specification/Inspection Criteria 

 Discrepancies in April 2004 Draft PWS 

Manufacturing 

Specification in TE-02 

Inspection Criteria 

in TE-08 

Coin- Nickel 

Blank Diameter 21.220-21.300 mm* 21.457-21.467 mm* 

Upset Diameter 20.98-21.08 mm 20.98-21.17 mm 

Upset Thickness 1.72-1.88 mm 1.73-1.88 mm 

Coin- Dime 

Upset Thickness 1.19-1.35 mm 1.19-1.36 mm 

Coin- Quarter 

Blank Diameter 24.22-24.30 mm 24.220-24.396 mm 

Upset Diameter 23.67-23.77 mm* 23.89-24.00 mm* 

Coin- Dollar 

Blank Gauge 1.587-1.664 mm 1.586-1.663 mm 

* If produced according to the manufacturing specifications, the inspection criteria 

would require all coins of the denomination to be rejected. 

All units of measure are in millimeters (mm). 

On May 21, 2004, we provided our written comments and 

discussed the weaknesses with the April 2004 draft PWS with the 

Mint Contracting Officer’s Technical Representative (COTR) and 

CO responsible for the PWS. 

We also reviewed the Mint’s August 2004 draft PWS, which 

included the seven TEs in the April 2004 draft PWS (TE-07 was 

not included), and two additional TEs (TE-09 and TE-10). TE-10 

identified the inspection criteria for the blank strip fabrication (the 

“input” for the coin blank production process). We believe this 

information was critical to the BAU competition study. A Mint 

official said that the Mint did not release TE-10 with the first draft 

of the PWS because originally the PWS team did not think that 

they were going to ask the contractor to re-inspect what is 

government supplied material after it was inspected at the 

manufacturers’ locations and shipped. Since then, the PWS team 

decided to ask the contractor to perform an inspection of the 

incoming strip material, basically to act as a quality control agent 

for the government; therefore, TE-10 was included in the August 

draft PWS. 
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As with the April 2004 draft PWS, we compared the Blank 

Specifications contained in TE-02 with the Inspection Criteria 

contained in TE-08 in the August 2004 draft PWS. For 9 of the 50 

manufacturing specifications, including the 7 specifications with 

discrepancies in the April 2004 draft PWS that we brought to the 

Mint’s attention earlier, the inspection criteria was different, as 

shown in the following table: 

Table 2: Manufacturing Specification/Inspection Criteria 

 Discrepancies in August 2004 Draft PWS 

Manufacturing 

Specification in TE-02 

TE-08 Inspection Criteria 

In TE-08 

Coin- Nickel 

Cut Diameter 21.220-21.300 mm* 21.457-21.467 mm* 

Upset Diameter 20.98-21.08 mm 20.98-21.17 mm 

Upset Thickness 1.72-1.88 mm 1.73-1.88 mm 

Cut Diameter .8354-.8386 inches .835-.839 inches 

Coin- Dime 

Upset Thickness 1.19-1.35 mm 1.19-1.36 mm 

Coin- Quarter 

Cut Diameter 24.22-24.30 mm 24.220-24.396 mm 

Upset Diameter 23.67-23.77 mm 23.89-24.00 mm 

Upset Diameter .932-.936 inches* .937-.941 inches* 

Coin- Dollar 

Thickness (Gauge) 1.587-1.664 mm 1.586-1.663 mm 

* If produced according to the manufacturing specifications, the 

inspection criteria would require all coins to be rejected. 

All units of measure are in millimeters (mm) or inches. 

Next we compared the Blank Specifications contained in TE-02 

with the Fabrication Specifications for Strip materials contained in 

TE-10. We identified 176 technical specification attributes 

contained in both TE-02 and TE-10 and determined that for 70 

attributes (nearly 40 percent), differences existed between 

specifications. These discrepancies are presented in Appendix 3. 

On August 31, 2004, we discussed these discrepancies with the 

Mint CO, COTR, and Team Leader responsible for the PWS. When 
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we asked why the 7 discrepancies that we initially identified were 

not corrected in the August 2004 draft PWS, we were informed 

that this task was delegated to the field and the COTR believed 

that the discrepancies were corrected. During this meeting, the 

Mint officials also informed us that TE-02 contained the blank 

specifications, which are maintained by the Mint headquarters. 

However, we were told that Denver and Philadelphia Mint 

personnel did not always agree on these specifications or the 

inspection criteria contained in TE-08. 

The nature and extent of the discrepancies noted in the two draft 

PWSs are indicative of a lack of appropriate quality control or 

supervisory review of these documents by the Mint before they are 

published for public comment. 

 

Recommendation

The Mint Director should ensure that: 

1. The BAU competitive study PWS provides for consistent 

manufacturing specifications and inspection criteria. In this 

regard, appropriate quality controls and supervisory review of 

the PWS should be put in place before future drafts of the PWS 

and the final solicitation are published. 

Management Response The Mint agrees with this 

recommendation. The Mint’s PWS Team has incorporated the 

necessary corrections into the PWS. In addition, to ensure that 

future draft of the PWS and solicitation are of the highest 

quality possible, the Mint intends to institute an additional 

supervisory review process prior to posting the complete 

solicitation package. The additional supervisory review process 

will be incorporated into the Mint’s procedures with standard 

operating procedures that will be implemented by 

November 30, 2004. 
MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

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OIG Comment The actions proposed by the Mint satisfy the 

intent of our recommendation. 

Finding 3 The Mint’s Decisions to Offer or Not Offer GFP Were Not 

Justified in Writing or Approved by the CSO 

The April 2004 and August 2004 drafts of the PWS stated that the 

Mint would not be furnishing any facilities to a non-Government 

service provider. TE-06 of the draft PWSs identified certain 

equipment that the Mint planned to make available to potential 

bidders for their use in producing the required blanks. The 

equipment included blanking presses, annealing furnaces, washers, 

dryers, upsetting mills, and associated equipment. 

The Circular requires that an agency determination whether to 

provide or not to provide GFP be justified in writing and approved 

by the CSO. In addition to the Circular’s requirement, the Mint’s 

Draft Directive MD 2A-2 requires that the CSO approve in writing 

prior to the official announcement of a study, the PWS Team 

Lead’s justification to provide or not provide GFP for the study. 

According to Mint officials, a written justification was not prepared 

to support the decisions regarding facilities and equipment to be 

offered or not offered. Accordingly, the Mint also did not obtain 

the CSO’s written approval of these decisions. By not preparing 

the required justification and subjecting it to CSO review, the Mint 

has not ensured that these decisions are in the best interest of the 

Government. 

Recommendation

The Mint Director should ensure that: 

1. The required justification is prepared and the determination to 

provide or not provide Government Furnished Property is 

approved by the Assistant Secretary of Management and Chief 
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Financial Officer. This should be accomplished before any 

future drafts of the PWS and the final solicitation are published. 

Management Response The Mint agrees with this 

recommendation. Before any draft posting or the issuance of 

the final solicitation, the Mint intends to prepare a justification 

regarding the Mint’s decision on GFP, and obtain approval of 

the Mint’s decision by the CSO. The justification to provide or 

not provide GFP will be forwarded to the CSO no later than 

November 12, 2004. 

OIG Comment The actions proposed by the Mint satisfy the 

intent of our recommendation. 

Finding 4 Potential Conflicts of Interest by Mint Officials and Staff 

Involved in the Mint’s A-76 Process Need to be 

Addressed

As important controls to maintain the integrity of competitive 

studies, the Circular requires (1) a separation, or “firewall,” 

between employees assigned to develop the PWS and employees 

assigned to develop the agency tender and (2) the assignment of 

certain Circular responsibilities only to employees in positions that 

are classified as inherently governmental. We noted a situation 

with respect to the BAU competitive study where an employee was 

assigned roles that were inconsistent with these requirements. We 

also noted that the Mint’s directive, which was still in draft at the 

time of our review, delegated responsibilities to the Associate 

Director/Chief Financial Officer to approve the Mint’s annual 

inventories categorizing activities performed by Mint personnel as 

either inherently governmental or commercial and to act on 

challenges to that inventory; the Circular requires that such 

responsibilities be separated. 

 
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These conditions are described below: 

• At the time of our review the Acting Chief of the Mint’s 

Competitive Sourcing Group (CSG) served dual roles. In his 

regular position, he served as the COTR for the preparation of 

the PWS and was intricately involved in the technical advice 

that goes into writing and editing the PWS. In his acting 

position, he served as the approving official for the competitive 

sourcing process with oversight authority for both the PWS and 

MEO teams. Maintaining a separation of these responsibilities is 

important to avoid an appearance of bias and as a control to 

ensure, for example, that cost estimates developed by the PWS 

team are not shared inadvertently or otherwise with the MEO 

team. 

• The Circular requires that agencies implement a process 

allowing for challenges to the inventories of inherently 

governmental and commercial activities. The Inventory 

Challenge Authority reviews and responds to challenges of the 

agency’s inventory decisions. This authority is to be assigned 

to an agency official at the same or higher level than the 

individual who prepared the inventory. The Inventory Appeal 

Authority reviews and responds to appeals of inventory 

challenge decisions made by the Inventory Challenge Authority. 

The Inventory Appeal Authority is to be assigned to an agency 

official who is independent and at a higher level in the agency 

than the Inventory Challenge Authority. 

In October 2003, the Mint issued a draft directive to establish 

policy and assigned responsibility for implementing the Circular.8

 

The draft directive did not specifically refer to an inventory 

challenge and appeal process in the same terms as the Circular. 

However, the draft directive assigned to the Associate Director/

Chief Financial Officer the responsibilities to: (1) approve the 

Mint’s final annual inventories prior to submission to the 

 

8 Draft Directive MD 2A-2, Chapter 2 – General Management, Performance of Commercial Activities.
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Department, (2) review challenges to the inventory 

classifications of certain functions as inherently governmental or 

commercial, and (3) decide the outcome of protests regarding 

competitive sourcing decisions. By assigning these functions to 

the same official, the Mint has not ensured that challenges and 

appeals to annual inventories will be considered in an 

independent and unbiased manner. 

We brought the above matters to management’s attention during 

our audit. Mint officials stated that MD 2A-2 was still in draft but 

corrective action would be taken concerning the assignment of 

inventory challenge and appeal authorities. The Mint, however, 

has not provided our auditors with details of the planned corrective 

action. 

Recommendation

1. The Mint Director should assign responsibilities for competitive 

studies and annual inventories of inherently governmental and 

commercial activities consistent with the Circular’s 

requirements. Specifically, the Mint needs to ensure that: 

(1) personnel are not assigned to acting positions that may 

involve, or appear to involve, a conflict of interest with their 

regular responsibilities; and (2) inventory challenge and 

inventory appeal authorities are assigned to separate individuals 

at an appropriate management level. 

Management Response The Mint agrees with this 

recommendation. (1) The Mint stated that the Acting Assistant 

Director for Competitive Sourcing became ill. As a result, the 

Mint installed the PWS Team Lead in that position. The Mint 

recognized that this situation could cause a conflict of interest, 

but took steps to avoid a conflict of interest as stated in their 

management comments in Appendix 4. The Mint intends to 

eliminate any perceived conflicts of interest and ensure 

appropriate firewalls between PWS and MEO Teams were in 

place by separation of duties. The Mint intends to develop 
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comprehensive standard operation procedures to address and 

enforce firewall issues and incorporate no later than 

November 30, 2004. 

(2) The Mint also responded that it would be designating the 

responsibilities for the Inventory Challenge Official and 

Inventory Appeals Official to different Mint managers by 

November 30, 2004. 

OIG Comment The actions proposed by the Mint satisfy the 

intent of our recommendation. 

* * * * * * 

We appreciate the cooperation and courtesies extended to our 

staff. If you have any questions, please contact me at 

(202) 927-5904. 

Thomas E. Byrnes 

Director, Procurement Audits 
Appendix 1 

Objective, Scope, and Methodology 

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Objectives 

The Conference Report (H.R. 108-401) for the Consolidated 

Appropriations Act, 2004 (P. L. 108-199) required the Treasury 

Office of Inspector General (OIG) to study the Mint’s use of premade blanks in the production of circulating coins. The study 

objectives are to determine whether the Mint followed OMB A-76 

policy, Mint acquisition regulations, and sound business practices 

as they administer the competitive sourcing study. 

In letters dated March 23, 2004, we informed the Congress that 

since the Mint had already publicly announced the OMB Circular 

A-76 BAU competition study, the study as described in the 

Conference Report could not be performed. However, we advised 

that we had initiated an audit with objectives to determine whether 

the Mint was conducting the BAU competition study in accordance 

with OMB requirements and Mint policies. 

Scope 

We began our study in February 2004. The interim report covers 

the Mint’s activities through October 25, 2004. Work continues 

on the Mint’s continuing BAU A-76 activities. The results of this 

interim report will be included in the final report. 

Methodology 

 

As part of the fieldwork completed to date, we have visited Mint 

facilities at their Washington, D.C. headquarters and the Mint 

manufacturing facility in Philadelphia, Pennsylvania. We 

interviewed key personnel involved in the A-76 Public Private 

competition, and reviewed contract file documentation and e-mail 

messages. We used the internet to find relevant reports and 

documents from the OMB, Government Accountability Office, and 

Mint websites. We also interviewed a key person from the support 

contractor hired to help Mint personnel conduct the A-76 

competition. We also reviewed the Mint’s timeline to determine 
Appendix 1 

Objective, Scope, and Methodology 

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Page 23 

whether it is meeting OMB regulated time limits. We requested 

data concerning the cost of the BAU competitive study. The Mint 

provided us estimates of the costs; however, we have not audited 

these estimates because all costs were not available at the time of 

this report. 

We are conducting our audit, and prepared this interim report, in 

accordance with generally accepted government auditing 

standards. 
Appendix 2 

Detailed Competitive Sourcing Study Schedule for BAU 

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U.S. Mint Detailed Sourcing Study Schedule Comparison BAU 

Provided to OIG on 02/10/2004 

MILESTONE TARGET DATE* COMMENT** 

Employee Meetings in Denver 10/16-17/2003 

Employee Meetings in Philadelphia 10/22-23/2003 

Employee meetings are necessary prior to formally 

announcing in FedBizOps under Circular A-76 

Study Announcement in FedBizOps 10/23/2003 START DATE 

Data Collection in Philadelphia 10/27-31/2003 

Data Collection in Denver 11/03-07/2003 

Data collection and interviews are to confirm the 

functions under study, number of FTE’s affected 

by the study, and any capacity or equipment 

issues. 

Received First Draft of PWS & QASP 11/21/2003 Initial draft submitted for review by the Mint PWS 

Team. 

PWS Team completes review of Draft 

PWS and QASP 

12/19/2003 2 weeks allowed for review. 

Updated Draft PWS and QASP 

Received 

01/09/2004 

PWS Team forwards revised Draft PWS 

and QASP to management 

01/16/2004 

Draft PWS and QASP management 

review complete 

02/13/2004 4 weeks allowed for review due to year end and 

holidays. 

Receive Final Draft PWS and QASP 03/16/2004 1 week to update drafts. 

MEO Support Solicitation 02/13/2004 Finalize issues with Statement of Work (SOW) & 

issue 2 wks. 

MEO Support Award 03/26/2004 4 wks to respond to SOW and 2 wks for 

evaluations & select. 

Post Final Draft PWS and QASP on 

FedBizOps for comment 

03/31/2004 By working closely with PWS contractor and 

Mint’s CO, the plan is to compress edit and 

incorporate Mint comments into PWS and QASP 

and post to FedBizOps reduced 2 weeks. 

MEO Training 04/12/2004 Begin training 10 days after award 

Receive industry/MEO comments on 

Posted Final Draft PWS and QASP 

04/28/2004 4 weeks allowed for comments. 

Final PWS and QASP complete 05/19/2004 3 weeks allotted to address comments in final 

PWS and QASP. 

Mint issues Solicitation via FedBizOps 06/02/2004 Time allotted to complete final solicitation package 

reduced 3 weeks to 2 weeks. This assumes that 

CO has previously handled necessary tier reviews 

base on a preliminary package during 

January-February time frame. 

Receive Tenders from Providers 08/11/2004 This reduces the open period from 15 weeks to 0 

weeks. During the same period the ATO must 

conduct an independent review of the MEO’s 

tender prior to the submission due date. 

Complete Source Selection 09/06/2004 Reduces source selection time from 8 weeks to 5 

weeks. It assumes clearly defined source selection 

evaluation criteria and the completeness of 

provider responses. 

Public Announcement of Award 09/10/2004 End Date 

*The dates in bold were actual dates at the time OIG received the document and the remainder 

of the dates were planned. 

** These comments were prepared by the Mint as part of its schedule. 
Appendix 3 

Draft Solicitation Released August 14, 2004 Comparison of Cupronickel and 

Clad Blank Specifications in TE-10 and TE-02

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Draft Solicitation Released August 14, 2004 

Comparison of Cupronickel and Clad Blank Specifications 

in TE-10 and TE-02

Specifications for Blanks to Produce Coins in Millimeters (mm) and Inches (in) 

Out of 176 comparisons, the following 70 discrepancies were found 

Item Coin- Nickel Coin- Dime Coin- Quarter Coin- Half Coin- Dollar

TE-10 TE-02 TE-10 TE-02 TE-10 TE-02 TE-10 TE-02 TE-10 TE-02 

Blank Grain Size 

Max 0.06 mm 0.07 mm 

 

0.06 mm 0.07 mm 

Blank Grain Size 

Max 0.0024 in 0.003 in NA 0.003 in NA 0.0028 in NA 0.003 in 0.0024 in 0.0028 in 

Strip Gauge 1.650 mm 1.651 mm 

Strip Gauge 

Tolerance (+) 0.0127 mm 0.013 mm 

Strip Gauge 

Tolerance (-) 0.0635 mm 0.064 mm 

Strip Width 12.699 in 12 11/16 in 

Strip Width 

Tolerance (+) 0.79 mm 0.8 mm 

Strip Width 

Tolerance (+) 0.031 in 1/32 in 

Strip Width 

Tolerance (-) -0.8 mm 0.0 mm -0.8 mm 0.0 mm -0.8 mm 0.0 mm -0.8 mm 0.0 mm -0.79 mm 0.0 mm 

Strip Width 

Tolerance (-) -1/32 in 0.0 in -1/32 in 0.0 in -1/32 in 0.0 in -1/32 in 0.0 in -0.031 in 0.0 in 

Clad/Plate 

Thickness missing missing 0.174 mm 0.175 mm 0.229 mm 0.226 mm 0.290 mm 0.289 mm 0.410 mm 0.413 mm 

Clad/Plate 

Thickness 

Tolerance (+) missing missing 

 

0.04 mm 0.041 mm 

Clad/Plate 

Thickness 

Tolerance (-) missing missing 

 

0.04 mm 0.041 mm 

Clad/Plate 

Thickness missing missing 0.0068 in 0.0069 in 0.0090 in 0.0089 in 

 

0.016 in 0.0163 in 

Nominal Core 

Thickness missing missing NA 0.826 mm 

Nominal Core 

Thickness missing missing NA 0.0325 in 

Roughness (max. 

μm, μin.) 0.038 μm 0.38 μm 0.038 μm 0.38 μm 0.038 μm 0.38 μm NA 0.38 μm 

Proof Roughness 0.018 μm 0.13 μm 0.020μm 0.13 μm 0.025 μm 0.30 μm 0.38 μm 0.25 μm 

Proof Roughness 15/12 αin * 10 αin 

Strip Hardness 

HR15T (min) ** 82 80 80 85 80 85 80 85 82 85 

Strip Hardness 

HR15T (max) ** 95 92 

 

95 92 

Bend Test 

(radius) 0.04 mm NA 0.04 mm 0.4 mm 0.04 mm 0.4 mm 0.04 mm 0.4 mm 0.04 mm 0.4 mm 

Bend Test 

(radius) 

0.02 

inches NA 

 

Bend Test 

(degrees) 

 

180 degrees 90 degrees 180 degrees 90 degrees 180 degrees 90 degrees 180 degrees 90 degrees 

Temperature 

(Celsius) missing missing 770 degrees 705 degrees 770 degrees 705 degrees 770 degrees 705 degrees 685 degrees 705 degrees 

Temperature 

(Fahrenheit) missing missing 1265 degrees 1420 degrees 

Max Blister Size missing missing 2.54 mm 2.50 mm 

% Composition: 

(coin, clad layer, 

core) NA 

Std comp. 

91.67% 

Cu & 

8.33% Ni NA 

Std comp. 

91.67% 

Cu & 

8.33% Ni NA 

Std comp. 

91.67% 

Cu & 

8.33% Ni 

3.7 – 4.3% 

Ni; 6.5 - 7.5%

Mn; 11.5 - 

12.5% Zn 

Std comp. 

88.5% Cu; 

2% Ni; 

3.5% Mn; 

6% Zn 

* TE-10 has both 15 and 12 listed for proof roughness. 

** These numbers are not mm or in but measures using hardness tester in accordance with ASTM-E 18. 
Appendix 4 

Management Comments 

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Appendix 4 

Management Comments 

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Page 27 
Appendix 4 

Management Comments 

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Appendix 5 

Major Contributors To This Report 

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Thomas E. Byrnes, Director, Procurement Audits 

John F. Lemen, Audit Manager 

Cynthia S. McKelvin, Audit Manager 

Ricardo M. Cabarrouy, Auditor-in-Charge 

Andras O. Schneider, Auditor 

Leslye K. Burgess, Referencer 
Appendix 6 

Report Distribution 

MANUFACTURING OPERATIONS: Mint’s Standard A-76 Competition 

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The Department of the Treasury

 Office of Strategic Planning and Evaluations 

 Office of Accounting and Internal Control 

Office of Asset Management 

Office of Budget 

Office of Management and Budget

 OIG Budget Examiner 

The Congress

 Committee on Appropriations, United States Senate 

Committee on Appropriations, House of Representatives 

Committee on Finance, United States Senate 

Committee on Financial Services, House of Representatives 

Committee on Government Affairs, United States Senate 

Committee on Government Reform, House of Representatives 

Subcommittee On Transportation, 

Treasury, and General Government, United States Senate 

Subcommittee on Transportation, Treasury, 

And Independent Agencies, House of Representatives