U.S. Department of the Interior 

Office of Inspector General 

GovWorks Gainsharing Program 

and Recovery of Costs Related to the 

Interior Franchise Fund

Minerals Management Service

Report No. 2002-I-0050 September 2002
H-IN-MMS-014-01-D

September 30, 2002 

United States Department of the Interior 

OFFICE OF INSPECTOR GENERAL 

Washington, D.C. 20240 

Memorandum 

To: Assistant Secretary for Policy, Management and Budget 

Assistant Secretary for Land and Minerals Management 

 

From: Earl E. Devaney 

Inspector General 

Subject: Final Report, GovWorks Gainsharing Program and Recovery of Costs Related 

to the Interior Franchise Fund, Minerals Management Service 

 (Report No. 2002-I-0050) 

The attached report presents the results of our audit of the Minerals Management 

Service’s (MMS) gainsharing (group incentive award) program and recovery of costs 

related to the Interior Franchise Fund (IFF) for fiscal years 1997 through 2001. Our 

objective was to determine whether (1) the gainsharing program of GovWorks (trade 

name for MMS’s fee for service procurement branch) was properly authorized and 

operated in an appropriate and equitable manner and (2) the expenses of IFF procurement 

activities were identified and recovered. Our office found multiple deficiencies in 

GovWorks gainsharing and about $377,000 in under recovered IFF related expenses. 

The Assistant Secretary for Land and Minerals Management agreed with our 

recommendations to terminate gainsharing and to fully recover costs. The Assistant 

Secretary for Policy, Management and Budget advised that the Department of the Interior 

should not allow any incentive award over and above the Department’s award program. 

Based on their responses, we consider the report’s three recommendations to be resolved 

and implemented. Accordingly, no further response to this report is necessary. 

The legislation, as amended, creating the Office of Inspector General, (5 U.S.C. 

App. 3) requires that we report to Congress semiannually on all audit reports issued, 

actions taken to implement audit recommendations, and recommendations that have not 

been implemented. 

If you have any questions regarding this report, please call me at (202) 208-5745. 

Attachment 
Executive Summary 

Minerals Management Service 

GovWorks Gainsharing Program and Recovery of Costs 

Related to the Interior Franchise Fund 

Results in

Brief 

Background 

and 

Objective 

GovWorks is the registered trade name of the procurement branch 

within the Minerals Management Service (MMS) that provides 

procurement services for MMS and other Federal entities, 

including the Interior Franchise Fund (IFF), a pilot franchise 

program established within the Department of the Interior (DOI) 

in 1997. IFF provides goods and services on a competitive feefor-service basis by subcontracting with other service providers 

within DOI, one of which is GovWorks. As a service provider, 

GovWorks is required to charge IFF for all costs associated with 

IFF activities. 

GovWorks developed and implemented a gainsharing (group 

incentive award) program in fiscal year 1997. The program was 

premised on the belief that employees should share in any gain 

resulting from increased productivity. In June 2001, the Acting 

Assistant Secretary for Policy, Management and Budget (PMB) 

requested MMS to suspend gainsharing payments pending 

completion of our audit. 

Our audit objective was to determine whether (1) the gainsharing 

program was properly authorized and operated in an appropriate 

and equitable manner and (2) the full costs of IFF procurement 

activities were identified and recovered. To help us evaluate the 

appropriateness of GovWorks award amounts and the merits of its 

award program, we also looked at the award programs of seven 

other Federal agencies and one private company, which are 

identified in this report as “benchmarking partners.”1

MMS should terminate its GovWorks gainsharing program. 

3⁄4 The gainsharing program was not authorized by DOI or 

MMS, nor did GovWorks develop and implement the 

________________________ 

1

 The Federal benchmarking partners were the U.S. Army, U.S. Mint, Bureau of

Engraving and Printing, the Tennessee Valley Authority (TVA), and three 

General Services Administration (GSA) offices: the Federal Systems 

Integration Management Center (FEDSIM), Federal Supply Service (FSS), and 

Public Building Service (PBS). We also reviewed one private company. 

i 
program in accordance with Office of Personnel 

Management (OPM), DOI, or MMS guidelines. 

3⁄4 The gainsharing awards were unreasonably high compared 

to incentive awards paid by our benchmarking partners and 

throughout the government. In fiscal year 2001, the 

highest total amount paid to benchmarking partner 

employees ranged from $1,000 to $11,000. Two 

GovWorks employees received $20,000 in fiscal year 

2000. Government-wide, the average incentive award 

payment was 1 percent of base salary. The normal payout 

for gainsharing programs was 4 to 5 percent of employee 

pay. GovWorks paid awards ranging from 16 to 

47 percent of base salary. 

3⁄4 There were weaknesses in the gainsharing award 

determination process, including an unreasonable 

performance target, incorrect award pool calculations, 

subjective performance criteria, and lack of a written 

payout formula for determining award amounts. 

We also found that GovWorks did not recover $377,252 of 

costs in providing procurement services to IFF. As a service 

provider to IFF, GovWorks was required by law to recover all 

IFF-related costs. It did not and instead used MMS 

appropriations to subsidize the costs of some of its IFF 

procurement services. 

Recommendations We recommended that the Assistant Secretary for Land and 

Minerals Management direct MMS to terminate the gainsharing 

program and establish procedures to identify and fully recover 

the costs of IFF activities. We also recommended that the 

Assistant Secretary for PMB determine whether IFF should 

allow any extra incentive program over and above the DOI 

award program.

ii 
Contents 

Page 

Background .............................................................................................................1 

 GovWorks Services and Organization..............................................................2 

 Gainsharing Program ........................................................................................2 

Objective and Scope................................................................................................4

Results of Audit.......................................................................................................5 

 GovWorks’ Gainsharing Program Should be Terminated................................5 

 Full Costs of IFF Procurement Activities Should be Recovered....................16 

Recommendations.................................................................................................18 

Agency Response and Office of Inspector General Reply.................................18 

Appendices 

1 Benchmarking Award Programs Features ...............................................19 

2 Agency Response.....................................................................................20 

3 Status of Recommendations ....................................................................21 

Figures

1 GovWorks Awards Paid, Fiscal Years 1998 Through 2000......................4 

2 Average Annual Award Payout Per Employee, Fiscal 

Years 1999 Through 2001 ...............................................................6 

3 Highest Total Award Payments to an Employee, Fiscal Year 2001..........7 

4 Comparison of Benchmarking Partner and GovWorks Award 

Programs .........................................................................................8 

5 Procurement Actions, Dollars, and Gainsharing Awards, 

Calendar Year 2000 ......................................................................14 

 

Abbreviations 

ABACIS................ Advanced Budget/Accounting Control and Information System 

DOI....................................................................................Department of the Interior 

FEDSIM .................................................. Federal Systems Integration Management 

FSS.........................................................................................Federal Supply Service 

GSA........................................................................ General Services Administration 

IFF.........................................................................................Interior Franchise Fund

MMS ..........................................................................Minerals Management Service 

NOAC .....................................................................................Notice of Action Code 

OPM.......................................................................Office of Personnel Management 

PBS ......................................................................................Public Building Service 

PMB ...................................................................... Policy, Management and Budget 

PSSD.....................................................Procurement and Support Services Division 

TVA ...............................................................................Tennessee Valley Authority 

U.S.C............................................................................................United States Code

iii 
Background The Procurement Operations Branch, which is within the 

Procurement and Support Services Division (PSSD) of MMS, 

provides procurement services to MMS and to other Federal 

agencies. In fiscal year 1997, the Branch took the trade name

“GovWorks”2

 in conducting its procurement services for nonMMS customers. The name GovWorks will be used throughout 

this report when referring to the Branch. Since fiscal year 1997, 

GovWorks has provided procurement services to MMS, GSA, and 

IFF. 

 

The IFF was established under Section 113 of the 1997 Interior 

and Related Agencies Appropriation Act.3

 The franchise fund

pilot program was authorized under Section 403 of the 

Government Management Reform Act of 1994.4

 The franchise 

funds would provide products and services to the participating 

agency, as well as to other Federal agencies, on a competitive feefor-service basis. The agreed upon fee was required to recover the 

full cost of the funds’ franchising operations. In addition, the 

franchise funds were allowed to structure their fees to accumulate 

a reasonable operating reserve and a capital improvement reserve 

of up to 4 percent of the total annual income. 

On May 17, 1996, the Office of Management and Budget 

designated DOI as one of six Federal agencies5

 authorized to 

establish franchise fund pilot programs. To preserve existing 

resources in the event the pilot program expired,6

 DOI 

management decided to operate IFF as a “virtual organization,”7

using resources from existing organizational structures rather than 

staffing a new organization. Accordingly, there are no human 

________________________ 

2

GovWorks® is a registered trademark of DOI. ©2001 The U.S. Department of

the Interior Franchise Fund/Minerals Management Service. 3

Act of Sept. 30, 1996, Public Law 104-208, Div. A. Title I, Sec. 101(d)[Title I, 

Sec. 113] (codified at 31 U.S.C. 501, notes) 4

Public Law 103-356, Sec. 403, 108 Stat. 3413 (codified at 31 U.S.C. 501,

notes) 5

The six Federal agencies authorized to establish franchise funds were DOI, 

Department of Commerce, Environmental Protection Agency, Department of

Treasury, Department of Veterans Affairs, and Department of Health and

Human Services. 6

The Franchise Fund Pilot Programs provision of Public Law 103-356 expired 

on October 1, 1999; however, the Pilot Programs have been extended through

October 1, 2002. 7

 DOI used the term “virtual organization” because although IFF is a separate 

legal entity with its own appropriation within DOI, IFF has no personnel or 

equipment attached to it as currently configured. 

1 
resource or tangible assets assigned to IFF. IFF obtains goods and 

services for its customers by “subcontracting” with DOI service 

providers under reimbursable interagency agreements authorized 

by Section 1535 (a) of the Economy Act.8

 IFF subcontracts with 

two providers: GovWorks and DOI’s National Business Center, 

which are required to charge IFF for costs associated with IFF 

activity. 

GovWorks provides “cradle-to-grave” procurement services by 

determining customer requirements and type of contract, preparing 

and advertising Requests for Proposals, receiving and evaluating 

vendor bids, negotiating with and selecting contractors, and 

managing the contract from start to finish. GovWorks charges 

about 3 percent of direct contractor costs for the services provided. 

From fiscal years 1997 to 2001, GovWorks increased its 

workforce almost three-fold, from 11 full-time employees to 30. 

During that time, GovWorks increased its total dollar amount of 

procurement awards over 500 percent ($62 million to $361 

million) and the number of actions awarded by almost 800 percent 

(550 actions to 4,387 actions). 

GovWorks 

Services and 

Organization 

As of July 2001, GovWorks employed 30 people: a Chief, 

15 contract specialists, and 14 procurement support personnel. In 

addition to the 30 GovWorks employees, six other employees 

worked with and supported GovWorks: a five-employee Policy 

Group assigned to PSSD and one employee from the Office of the 

Associate Director of Administration and Budget. 

Gainsharing 

Program 

GovWorks developed and implemented a group incentive 

program, called “gainsharing9

,” in fiscal year 1997. According to 

the GovWorks Chief, who manages the program, quarterly award 

payments were paid to all procurement personnel assigned to 

PSSD with a satisfactory performance rating if the total dollar 

amount of procurement actions projected during a performance 

year exceeded $34 million (the total dollar amount of procurement 

actions issued in fiscal year 1996, the benchmark year). The Chief 

also determined and paid awards to non-PSSD employees (for 

example, employees in the Information Resources Management, 

Budget and Finance, and Personnel Divisions), who were not 

________________________ 

8 31 U.S.C. §1535 9

 OPM defines gainsharing as programs that reward groups of employees whose 

performance increases productivity or reduces costs. The agency shares its 

savings with those who produced them by calculating lump-sum “gain shares” 

using a preset formula. More information on gainsharing can be found on

pages 9 and 10 of the report. 

2 
officially participants in the gainsharing program because they 

were not GovWorks employees. The Chief felt they contributed 

to PSSD accomplishments. All award payments, including 

payments to non-PSSD employees, were charged to IFF. 

The award pool, which was estimated based on 10 percent of total 

earned franchising fees each quarter, remained available until 

distributed. The award pool has two components, an equity 

portion10 and a performance portion. Up to 50 percent of the 

award pool was available for distribution to all gainsharing 

participants as an equity share. The remainder of the pool was 

distributed to employees who significantly contributed to the 

success of the franchise program and the procurement program. 

With the exception of the Chief of GovWorks and the Chief of 

PSSD, who established limits of $10,000 for themselves, each 

employee could receive up to $20,000 in a year.11 Except for 

himself, the GovWorks Chief determined and recommended how 

much to distribute to every award recipient, including his 

supervisor, the PSSD Chief. The PSSD Chief recommended an 

award amount for the GovWorks Chief and either approved or 

adjusted the award amounts recommended by the GovWorks 

Chief. The MMS Associate Director for Administration and 

Budget approved the award amounts for both the GovWorks and 

PSSD Chiefs. 

As shown in Figure 1, the total dollar amount of awards increased 

from $40,500 in fiscal year 1998 to $258,400 in fiscal year 2000. 

During this time, the number of employees who received awards 

increased from 23 (12 GovWorks and 11 non-GovWorks) to 

55 (24 GovWorks and 31 non-GovWorks). Total payments to 

individuals in fiscal year 2000 ranged from $750 to $20,000 for 

GovWorks employees and from $500 to $9,000 for nonGovWorks employees. Figure 1 also shows the percentages of 

total dollars paid to GovWorks (blue) and non-GovWorks (red) 

employees. In fiscal year 2001, which began October 1, 2000, 

GovWorks made award payments in October and November 

totaling $104,000. 

________________________ 

10The equity share is the portion given out to all program participants, although

the actual amount distributed was not the same for each employee. 11 Employees also received performance awards in addition to GovWorks award 

payments. 

3 
 



74%

26% 83%

17% 77%

23%

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

A

W ARDS PAY

MENTS

1998 1999 2000

GovW orks Non-GovW orks

$40,500

$121,750

$258,400

GovWorks Awards Paid 

Fiscal Years 1998 Through 2000

Figure 1 

Payments were stopped after November when MMS began an 

internal evaluation of the award program. In June 2001 the Acting 

Assistant Secretary for PMB asked MMS to suspend gainsharing 

payments until our audit was completed and DOI had an 

opportunity to examine our findings. 

Objective 

and Scope 

We audited the GovWorks gainsharing program and IFF 

procurement activities for fiscal years 1997 through 2001 to 

determine whether (1) the gainsharing program was properly 

authorized and operated in an appropriate and equitable manner 

and (2) the full costs of IFF procurement activities were identified 

and recovered. As part of our audit, we also obtained information 

about the award programs of seven other Federal agencies and one 

private company, which we identified as benchmarking partners 

(see Appendix 1). We compared specific program features and 

the amounts of awards paid for fiscal years 1999 through 2001 for 

these benchmarking partners with GovWorks’ program features to 

determine the appropriateness of GovWorks awards and the merits 

of the program’s operation. 

Except for the benchmarking comparison, we conducted our audit 

in accordance with the “Government Auditing Standards,” issued 

4 
by the Comptroller General of the United States. Accordingly, we 

included such tests of records and other auditing procedures that 

were considered necessary under the circumstances. 

Results of 

Audit MMS should terminate its GovWorks gainsharing program and 

recover the full costs for procurement services provided to IFF. 

The gainsharing program, which was developed and implemented 

in 1997 to reward employees for continuous high performance, 

instead became a de facto entitlement program that paid 

unreasonably high awards without proof of commensurate gains in 

productivity. In addition, GovWorks did not recover the full costs 

of providing procurement services to IFF, as required by law, and 

as a result used MMS appropriations to subsidize IFF procurement 

activities.

GovWorks’ 

Gainsharing 

Program 

Should be 

Terminated

The GovWorks gainsharing program resulted in awards being paid 

even during times when GovWorks IFF activity resulted in a loss. 

The GovWorks gainsharing program was not authorized by DOI 

or MMS, and GovWorks did not adhere to OPM, DOI, or MMS 

guidelines in developing and implementing the award program. 

GovWorks’ program lacked both quantifiable criteria for 

measuring productivity gains and an established payout formula 

for determining award amounts. GovWorks’ award payment per 

employee for fiscal year 2000 averaged $7,685, over 65 percent 

greater than the highest average award payment of $4,667 made 

by a benchmarking partner. 

Comparison 

of Awards 

Paid by 

Partners 

and by 

GovWorks

Based on a comparison of award payments made by our 

benchmarking partners and GovWorks, the GovWorks payments 

appear unreasonably high. In fiscal year 2000, two of the Federal 

agencies in our benchmarking analysis established annual award 

limits of $1,000 and $3,200, and two other Federal agencies 

limited awards to 6.25 and 7.5 percent of employee salaries. To 

illustrate the difference between awards paid by the agency with a 

limit of 7.5 percent of base salary and awards paid by GovWorks, 

an employee with an annual award limit of 7.5 percent of base pay 

would need a salary of about $267,000 to receive the GovWorks 

annual limit of $20,000. The other three Federal agencies and the 

private benchmarking partner did not have annual limits, but their 

award pools were limited because they were based either on 

gainsharing12 or on salary. 

________________________ 

12Gainsharing programs are based on cost reduction and are thereby limited by

how much costs can be reduced, while still maintaining increased productivity 

(output level). 

5 
Figure 2 compares the average annual award per employee13 paid 

by the benchmarking partners for fiscal years 1999 through 2001 

to the awards paid by GovWorks.14 In fiscal years 1999 and 2000, 

the average payout per employee for the benchmarking partners 

ranged from $600 to $4,667, while GovWorks paid an average of 

$5,534 in fiscal year 1999 and $7,685 in fiscal year 2000. In fiscal 

year 2001, GovWorks paid out awards in October and November 

2000 totaling $104,000 before the program was suspended. If 

GovWorks had continued to pay awards at the same rate as fiscal 

year 2000 (12 percent of total IFF franchising fees collected), the 

payout would have been $553,176, or about $15,366 per award 

program participant. 



























































































































































$1,000 $900 $1,000















































































































 



































































 $845

$1,761

















































































































































 







































































 $893

$2,638

$1,790























  











































































































 

































































$600

$2,900

$2,200



















































































































































 

















































































































































 



















































































































































$4,667 









































































































































































































































































































































































































































































































































































































































































































































































































































$5,534

$7,685

$15,366

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

DOLLAR AWARD

Army GSA-PBS GSA-FSS Engraving GSA-FEDSIM GovWorks

AGENCIES

 FY 1999  FY 2000  FY 2001

*

*Assuming same payout

rate as FY 2000

Average Annual Award Payout Per Employee 

Fiscal Years 1999 Through 2001

Figure 2 

________________________ 

13Calculated by dividing the total paid out during the year by the number of 

program participants 14 TVA, the U.S. Mint, and the private company were not included in Figure 2 

because they did not pay awards all 3 years from fiscal years 1999 to 2001. 

6 
Figure 3 shows that the highest total awards paid to an individual 

in fiscal year 2001 by benchmarking partners ranged from $1,000 

to $11,000.15 Two GovWorks employees received $20,000 in 

fiscal year 2000. 







































































$1,000





















































































































$2,200



















































































































































$3,000 



























































































































































$3,567













































































































































































































































































$5,250



















































































































































































































































































































































$7,100













































































































































































































































































































































































































































































































$11,000





























































































































































































































































































































































































































































































































































































































































































































































































































































 

$20,000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

D

OLLAR AWAR

D

Army Engraving Private GSA-FSS GSA-PBS TVA GSAFEDSIMGovWorks

BENCHMARKING PARTNERS

*

* Assuming same payout as FY 2000

Highest Total Award Payments to an Employee 

Fiscal Year 2001

Figure 3

We met with OPM officials, who told us that government-wide 

the average incentive award pay was 1 percent of base salary. In 

addition, we obtained a gainsharing analysis and benchmarking 

study acquired by GSA’s Federal Supply Service, which cited 

award payments of 2.5 to 3 percent of employee pay for new 

gainsharing programs and 4 to 5 percent for established programs. 

GovWorks paid awards ranging from 15 to 47 percent of base 

________________________ 

15The U.S. Mint was not included in Figure 3 because it did not pay awards in 

fiscal year 2001. 

7 
salary to employees who worked the entire year in calendar year 

2000. 

GovWorks 

Program 

Weaknesses 

We reviewed the GovWorks program to determine whether the 

high award amounts could be justified. We also evaluated the 

award features of our benchmarking partners and compared them

with GovWorks to help us determine whether the GovWorks 

program was operated in a reasonable, equitable, and efficient 

manner. The comparison of award program features (Figure 4) 

and our analysis revealed critical weaknesses in the GovWorks 

program. 

 



























 













 













 













 













 













 



























 













 













 













 













 













 

AGENCIES

Individual 

Payment 

Determination 

Documented

Individual Payout 

Limits

Participants Know 

How Payments 

Determined

Payout 

Methodology 

Documented

Payments Limited 

to Participants 

Considers Past 

Performance





































 

 





  

  





 











 

 

U.S. MINT Y Y Y Y Y

BUREAU OF

ENGRAVING Y Y Y Y Y Y

GSA-FEDSIM Y Y Y Y

GSA-PBS Y Y Y Y Y Y

GSA-FSS Y Y Y Y Y

TVA Y Y Y Y Y Y

ARMY Y Y Y Y Y Y

PRIVATE Y

GOVWORKS Y





 

 



 

 

N

N N

N

N N N N N

N N N N N

Comparison of Benchmarking Partner 

and GovWorks Award Programs

Figure 4 

The programs for the seven Federal partners evaluated during our 

benchmarking analyses were characterized by quantifiable and 

documented criteria for measuring performance. These programs 

used either cost reduction (gainsharing) or goal achievement 

(goalsharing16) as the basis for paying awards. In addition, the 

________________________ 

16Goalsharing is another incentive award program closely related to

gainsharing, except that goalsharing is more suitable for work that is not readily 

measurable in financial terms.

8 
seven Federal agencies had established payout formulas to 

determine and document the award amount. These formulas were 

understood and accepted by the program participants. They knew 

what was required of them and how the award amounts were 

calculated. Six Federal agencies had incorporated past 

performance into their performance evaluation process, and all 

eight partners limited award payments to program participants. 

The GovWorks program did not meet OPM, DOI, or MMS 

guidelines and did not use cost reduction or goal achievement as 

the basis for its awards. Instead, GovWorks used increases in the 

dollar amount of procurement activity regardless of cost, which, in 

turn, resulted in awards being paid even when the operation 

resulted in a loss. In addition, the program used an unreasonably 

low benchmark or performance target from 1996 for initiating 

awards and an erroneous awards pool for determining awards. 

The evaluation of employee performance and the payout 

methodology were subjective and undocumented and did not 

consider past performance. The administration of the award 

program also created inequities in how and where the program 

was implemented. These critical weaknesses are discussed in

detail in the following paragraphs. 

GovWorks did 

not Meet OPM, 

DOI, or MMS 

Guidelines

As developed and implemented, the program was neither 

gainsharing as defined by OPM guidance nor a productivity 

improvement program as defined by the DOI Awards Handbook. 

Rather, the GovWorks program was developed based on a 

misapplied definition of gainsharing, which assumed that 

increased total procurement dollars awarded equaled increased 

productivity without regard to costs or the net results of 

operations. 

OPM Gainsharing. OPM defines gainsharing17 as programs that 

reward groups of employees whose performance increases 

productivity18 or reduces costs. The agency shares its productivity 

gains with those who produced them by calculating lump-sum 

payments or “gain shares” using a preset formula, with a fixed 

performance period and an established measurement baseline. 

Basic features of gainsharing programs include: 

________________________ 

17OPM publication “Gainsharing: An Overview,” published 1996. 18Federal Personnel Manual Letter 451-6, Subchapter 9 – “Productivity

Gainsharing Programs,” defines productivity as using resources (inputs such as 

labor, capital, materials, or energy) to produce a measurable output. Improving 

productivity can mean improving resource use and/or improving outputs.

9 
3⁄4 Productivity measurable in financial terms. The agency 

must be able to quantify the time and resources used in 

completing a product or unit of service and convert them

into dollars spent or saved. 

3⁄4 Baseline measurements. In the purest meaning of 

gainsharing, the average cost of a unit of production during 

the previous performance period is the baseline for the 

next performance period. The emphasis is on gain, or 

continuous improvement. 

3⁄4 Payout formulas. Gainsharing awards are typically based 

on splitting gains between the agency and the employees. 

The employee share may be divided equally among all 

involved employees or based on each employee’s 

contribution during the performance period. When the 

formula permits contribution-based variations, criteria 

must be clearly communicated and accepted as fair by all 

employees. 

GovWorks did not incorporate these basic features into its award 

program. GovWorks did not quantify the time and resources used 

in completing a product or unit of service and convert them into 

dollars spent or saved. It did not consider past performance in 

evaluating individual employee performance and therefore did not 

consider continuous improvement. GovWorks also did not have a 

payout formula or written procedures to determine the award 

amount each employee would receive each quarter. 

DOI Productivity Improvement Award. A productivity 

improvement award as defined by DOI19 provides for cash awards 

for increasing productivity through improving processes, 

suggesting cost savings, streamlining, or eliminating non-value 

added processes. The Handbook states that the “employee(s) 

shares some portion of actual savings resulting from cost 

reduction or productivity gains.” The GovWorks’ award program

is not based on generating cost savings or increasing productivity, 

but simply on increasing revenue and then distributing a portion of 

the increased revenue to the employees. 

MMS Approval Requirements. At the time of our review, the 

GovWorks award program policy had not been approved or issued 

in the MMS Manual. In addition, GovWorks did not comply with 

________________________ 

19“Department of the Interior Human Resources Management Handbook, 

Awards and Recognition Program,” issued February 1996. 

10 
Section VF1e of the MMS Manual “Handbook, Administrative 

Delegations of Authority” (Release No. 237, dated February 23, 

1996), which requires the Assistant Secretary for Land and 

Minerals Management to approve group awards with an aggregate 

amount over $10,00020 or individual awards over $5,000. The 

first group award payment, totaling $40,500, was distributed to 

participants on September 28, 1998. The last group award 

payment, totaling $48,000, was made on November 5, 2000. 

GovWorks did not obtain approval for its group awards because 

the MMS Personnel Office did not consider gainsharing to be a 

group award program. As implemented, however, the program 

was based on a group incentive program, and participants received 

awards based on group achievement. Also, in identifying the 

award payments in its personnel records, MMS used a code21 that 

designated the payments as group cash payments.22

GovWorks’ performance target for the award program was 

unreasonably low. Specifically, the triggering event for award 

payments occurred when the projected total annual dollar amount 

of all procurement actions (MMS, IFF, and GSA) exceeded

$34 million, which was the total dollar amount of procurement 

actions issued in fiscal year 1996. GovWorks began franchising 

out its procurement services in fiscal year 1997. By establishing a 

fixed benchmark using a measure that existed before its 

franchising activity, GovWorks essentially guaranteed award 

payments each year and failed to follow the OPM requirement to 

demonstrate continuous improvement. Without this emphasis on 

continuous improvement, the awards became entitlements. 

GovWorks 

Lacked 

Reasonable 

Performance 

Target

The award pool was calculated using the wrong base. Since all 

award payments were charged to IFF, only IFF procurement 

activity should have been considered in determining the amount of 

awards. GovWorks, however, considered its award pool to be 

GovWorks 

Calculated 

Award Pool

Incorrectly

________________________ 

20The MMS Manual cites that the approval level for all group awards is driven 

by the aggregate amount of the award. 21Nature of Action Codes (NOAC) are unique numerical codes that identify 

particular personnel actions (appointments, promotions, or awards) that

agencies report to the Central Personnel Data File for statistical and data 

processing purposes. 22Effective October 1, 2000, OPM changed the NOAC designations for awards

by eliminating some categories, such as gainsharing, performance, and special 

act, and combining all cash awards into either individual (#840) or group

(#841) cash awards. Prior to October 1, 2000, MMS designated payments 

under the Program as gainsharing payments under NOAC #874. Since 

October 1, 2000, GovWorks award payments have been coded #841 for group 

cash awards. 

11 
10 percent of its fees from all of its franchising activities, thereby 

overstating the pool and the award payments charged to IFF. For 

example, by including fees for all franchising activity in the award 

pool, GovWorks actually paid out gainsharing payments 

representing 16 percent, 17 percent, and 12 percent of total fees 

collected from IFF activity in fiscal years 1998, 1999, and 2000, 

respectively. Furthermore, as part of determining individual 

award amounts, GovWorks considered all procurement activities, 

including those conducted for GSA and MMS. 

Since IFF funded the full cost of the GovWorks award payments, 

we determined that the IFF was overcharged. We estimated that 

IFF was charged about $260,000 in program award payments for 

non-IFF activity, which represented about 54 percent of total 

program awards of $484,150 paid in fiscal years 1999 through 

2001. 

GovWorks 

Overcharged 

IFF

According to the GovWorks Chief, he charged all award payments 

to IFF because when GovWorks started providing service to IFF 

customers in fiscal year 1997, the procurement personnel 

servicing MMS and GSA were required to perform additional 

work, including working uncompensated overtime. When the 

award program was implemented, procurement personnel 

servicing MMS and GSA were given award payments, even 

though the GovWorks gainsharing program was fully funded by 

IFF. 

This action was not appropriate or valid for a number of reasons. 

First, as Federal employees, if they were entitled to overtime pay, 

the remedy available to them would be to seek compensation 

through an administrative or adjudicative process,23 not for 

management to later “make up” pay through an awards program. 

Second, in later years, staffing was increased to meet IFF needs, 

therefore the workload was evenly distributed among all staff, 

eliminating the need for substantial overtime. Third, we evaluated 

the time sheets of GovWorks staff from fiscal year 1999 through 

May 2001 and concluded that, except for the team leaders, the 

remainder of the GovWorks staff did not work significant 

uncompensated overtime. In general, employees who did work 

overtime received either overtime pay or compensatory time. 

________________________ 

23 The administrative process would be to file an employee grievance or to

request a Comptroller General’s decision and the adjudicative process would be 

to file a lawsuit. 

12 
GovWorks 

Lacked 

Performance 

Evaluation 

Criteria

As implemented, the GovWorks program lacked written policies 

and procedures establishing criteria to evaluate and measure 

individual achievement and to determine the amount of individual 

cash awards. Individual employee performance was evaluated

subjectively rather than by measurable criteria. Only the 

GovWorks Chief knew of the undocumented factors and criteria 

used to evaluate each employee’s performance and to determine 

the award amount recommended for that employee. Therefore, 

the evaluation factors were not quantified or documented and 

could not be objectively correlated to the awards received. For 

example, some of the factors purportedly considered by the Chief 

were his personal knowledge of each employee’s 

accomplishments, including the complexity of the procurement 

actions, the new business generated, the types of assignments, and 

the marketing and promotion of GovWorks. 

There were also no quantifiable or documented performance 

indicators for non-contract specialists in GovWorks (which 

represented about half of the staff), Policy Group employees, or 

non-PSSD employees who received awards. The Chief stated that 

when evaluating support personnel, he considered the procurement 

activity of the contract specialists with whom the support 

personnel worked. In evaluating Policy Group or non-PSSD 

employees, the Chief determined how much he wanted to give 

each employee based on his judgment of the value of the work 

performed for GovWorks. 

The Chief did not consider past performance in evaluating 

individual employees. In evaluating contract specialists, the Chief 

looked only at the current period’s procurement activities. OPM 

gainsharing guidance cites that “in the purest meaning of 

gainsharing, the average cost of a unit of production during the 

previous performance period is the baseline for the next 

performance period. The emphasis is on gain, or continuous 

improvement.” Even using the misapplied productivity 

improvement criteria of increasing procurement award dollars, the 

Chief did not compare the current period’s performance to that of 

previous periods to determine whether employees increased their 

award numbers from one period to the next. 

The only quantifiable performance indicator used by the 

GovWorks Chief was the number and total dollars of procurement 

actions completed by each contract specialist for all activities 

(MMS, IFF, and GSA). Figure 5 shows this indicator and the 

amount of gainsharing awards for calendar year 2000. As shown 

13 
in the figure, there is no direct correlation between the number and 

total dollars of procurement actions and the amounts awarded to 

each employee 

0

50

100

150

200

250

300

350

400

450

A F X C E D J I G L M

Number of Procurement Actions Dollar Amount of Procurement Actions (Millions)

$17,500

$15,000

$12,300

$11,500

$11,000

$10,500

$9,500

$6,000

$20,000

Gainsharing

Annual Award

 Total

 Contract Specialists

Procurement Actions, Dollars, and Gainsharing 

Awards, Calendar Year 2000 

Figure 5 

GovWorks did not have a payout formula or written procedures to 

determine the award amount each employee would receive each 

quarter. Program policy guidance stated that half the award pool 

would be distributed to all the participants and half the pool would 

be distributed based on individual contributions to the success of 

IFF and GovWorks. There were no written procedures, however, 

establishing how this process would be accomplished. In our 

review of past payments, the Chief did not identify or document 

which part of an employee’s award was for the equity share and 

which part was based on performance. 

GovWorks Lacked 

Procedures to 

Determine and 

Inform Employees 

About Individual 

Cash Awards

14 
The documentation justifying individual awards was also 

inadequate. The GovWorks Chief determined each employee’s 

award amount, but did not document what individual performance 

factors he considered or how he used the performance factors to 

determine the award amounts. In addition, GovWorks employees 

told us that they did not know how their award amounts were 

determined or what they had to accomplish to receive award 

amounts. The GovWorks Chief generally did not meet with 

employees before or after they received their awards to discuss 

how their performance was evaluated or how the award amounts 

were determined. In most cases, employees found out about their 

awards after receiving the money or the Notification of Personnel 

Action (SF50). The justifications attached to the SF50s provided 

a generic description of why the employee received the award, for 

example, recognizing the contributions the employee made while 

working in GovWorks and adding to the success of the IFF. 

Specific individual employee contributions, however, were not 

documented. 

As developed and implemented, the award program did not 

provide other MMS employees performing similar work with the 

opportunity available to GovWorks employees. We found MMS 

non-GovWorks procurement employees who performed MMS 

procurement work at other locations but did not receive award 

payments because they were not participants in GovWorks’ award 

program. For example, in calendar year 2000, two GovWorks 

employees who worked on MMS procurement activities for 

96 percent and 100 percent of their time received GovWorks 

awards of $15,000 and $11,000, respectively. In addition, these 

two employees received performance awards of $5,000 and 

$2,000, respectively. The employees in the other locations who 

worked on MMS procurement activities for 100 percent of their 

time received performance awards ranging from $500 to $3,075. 

They did not have the opportunity, however, to receive additional 

award payments that were available to the GovWorks employees. 

GovWorks 

Lacked Parity 

GovWorks did 

not Consider 

IFF Handbook 

Policies

The IFF Handbook, which establishes policies and procedures for 

IFF operation, allows for the use of any surplus revenues for 

establishing an operating reserve to pay for “the ordinary and 

necessary operating costs (direct and indirect), which must be 

incurred to meet the service provider’s obligations to its customers 

prior to receiving reimbursement.” However, when we applied 

the “ordinary and necessary” qualifier to the reimbursement of 

costs incurred by service providers performing work for IFF—

specifically the payment of awards—we concluded that such 

15 
payments were not “ordinary or necessary” for GovWorks to meet 

its customer obligations. 

Group award programs such as gainsharing and goalsharing are 

uncommon in the Federal government. The GovWorks’ award 

program is unique, not only within DOI, but also within the realm

of gainsharing and goalsharing programs currently existing within 

the Federal government. We found no other Federal agency 

program that based its awards on increased revenue, where such 

revenue was driven by the purchasing activity of outside agencies. 

We acknowledge that participation in the gainsharing program 

improved morale among GovWorks employees. Considering the 

fact that all GovWorks employees received performance awards in 

addition to the gainsharing awards, however, it is questionable 

whether the payment of awards under the program was, in fact, 

necessary to meet customer needs. 

Since the gainsharing award payments are charged to IFF 

operations, IFF should decide whether GovWorks should be 

reimbursed for such payments. If GovWorks had not paid 

gainsharing, MMS would not have incurred losses in its IFF 

operations in fiscal years 1998, 2000, and 2001. IFF’s Executive 

Board24 and DOI management should decide if GovWorks will 

have an award program in addition to the incentive awards 

program already available to all MMS employees. They should 

also decide whether IFF funds should be used for awards or for 

operational reserves and capital improvements allowed under 

franchise fund legislation. In implementing an awards program,

the Board and DOI management should also consider equity 

among employees throughout DOI and prevent the lack of parity 

we found within MMS. 

MMS used its appropriations to subsidize procurement activities 

for IFF because it did not establish procedures to ensure that all 

IFF-related costs were identified and recovered. Section 113 of 

the 1997 Interior and Related Agencies Appropriation Act requires 

IFF to recover all costs of operation, including accrued annual 

leave. Because of the nature of IFF’s organization, all costs 

associated with IFF are first incurred by the service providers and 

then recovered from IFF. Service providers are therefore 

responsible for establishing procedures to ensure full recovery of 

all IFF-related costs. 

Full Costs of IFF 

Procurement 

Activities Should 

be Recovered

________________________ 

24The Executive Board is responsible for recommending operating policies and 

procedures to the Assistant Secretary for PMB and ensuring compliance with 

required statutes, regulations, and policies. 

16 
Based on our analysis of GovWorks’ revenues and expenses and 

of IFF’s audited financial statements, we estimated that MMS did 

not recover costs totaling about $377,252, as follows: 

3⁄4 Net losses from GovWorks reported in the IFF’s financial 

statements from fiscal years 1997 ($33,747), 1998 

($3,227), 2000 ($190,373), and 2001 ($48,710) totaling 

$276,057. 

3⁄4 Unrecovered gainsharing payments from fiscal year 1998 

totaling $9,195. 

3⁄4 Accrued unused annual leave as of September 30, 2001, 

estimated to be about $92,000. 

We determined that GovWorks tracked the revenue and expenses 

of its franchising activity on a monthly basis to recover its IFFrelated costs. Instead of tracking actual invoiced costs and billed 

revenue, however, GovWorks, for multi-year contracts, based its 

calculation on recognizing 60 percent of the contract cost and 

revenue in the first year of the contract and the other 40 percent in 

subsequent years. Therefore, GovWorks financial information did 

not reconcile to MMS’s accounting system, the Advanced 

Budget/Accounting Control and Information System (ABACIS), 

or IFF’s audited financial statements. For the fiscal year ending 

September 30, 2001, for example, GovWorks was tracking 

revenue of $170.2 million, which should match IFF revenue 

reported in ABACIS and IFF’s GovWorks expenses reported in 

IFF’s financial statements. ABACIS, however, reported 

$195.5 million in revenue, and IFF reported $198.0 million in 

GovWorks related expenses. Since GovWorks did not track the 

actual revenue and expenses of its IFF activity, it was not able to 

ensure that it recovered the full cost of that activity. 

In fiscal year 1998, gainsharing payments totaling $40,500 was 

paid to GovWorks and non-GovWorks employees; however, all 

the payments were charged to the GSA activity. We estimated 

that $9,195 was applicable to IFF activity and should have been 

charged and recovered from the IFF. 

In the case of accrued unused annual leave, GovWorks employees 

did not know they were required to recover this expense for IFF 

activity. Since it has never been recovered, the unrecovered 

expense is the accrued unused annual leave as of September 30, 

2001. In the future, only the amount over $92,000 will need to be 

recorded and recovered.

17 
Recommendations

Our recommendations concerning MMS policies and procedures are 

addressed to the Assistant Secretary for Land and Minerals 

Management. The recommendation regarding IFF policies and 

procedures is addressed to the Assistant Secretary for PMB because 

as DOI’s Chief Financial Officer, the Assistant Secretary for PMB 

oversees DOI’s Franchise Fund Pilot Program. We therefore 

recommend that: 

1. The Assistant Secretary for Land and Minerals Management 

direct MMS to terminate the GovWorks gainsharing program. 

2. The Assistant Secretary for Land and Minerals Management 

direct MMS to establish procedures to identify and fully 

recover the full cost of IFF activities, reconcile financial 

information used in the cost-recovery process with MMS’s 

accounting system, and include MMS Financial Management 

Branch employees in the cost-recovery process. 

3. The Assistant Secretary for PMB determine if IFF should 

allow any extra incentive program over and above the DOI 

award program. 

Agency Response 

and Office of 

Inspector General 

Reply 

In the September 4, 2002 response to the draft report 

(Appendix 2), the Assistant Secretary for Land and Minerals 

Management concurred with recommendations 1 and 2. The 

Assistant Secretary recognized that MMS had stopped the 

gainsharing program in December 2000 and required MMS to 

obtain approval from the Assistant Secretary’s Office if MMS 

wished to reinitiate the gainsharing program. The Assistant 

Secretary also directed MMS to fully implement 

recommendation 2. 

The Assistant Secretary for PMB, during discussions with our 

office, advised that there should not be any extra incentive 

programs over and above the DOI award program. 

Based on the response and discussions with the Assistant 

Secretary for PMB, we consider the three recommendations 

resolved and implemented.

18 
19 







































 



































 





















 

































 

































 

































 





































 





























































 



































 





















 

































 

































 

































 





































 























AGENCIES

Type of Program

Program Started

Quantifiable 

Performance 

Measures

# of Program 

Participants

Determination 

of Award Pool

FY '00 Pool

Indiv. Paym

Dete









 

  





  



  

























































  

 











    

  



U.S. MINT

Gainsharing F

Y '01 Cost Savings 2,800 45% of Cost Savings N/

A

Formula 

BUREAU O

F

EN

G

RAVIN

G

Gainsharing F

Y '99

Cost Savings/

Goal

Achievement

2,600

Cost Savings 

& Formula $7,540,000

Formula 

G

SAF

EDSIM

Goalsharing F

Y '99

Goal

Achievement 

& Customer

Satisfaction

150 7.5% of Direct Salaries $700,000 80% formul

20% 1 perso

GS

A-P

B

S

Goalsharing F

Y '98 Goal

Achievement 7,100

Budgeted $12,500,000

Formula 

GS

A-F

S

S

Gainsharing F

Y '92 Cost Savings 545

Cost Savings 

& Formula $1,437,000

Formula 

TV

A

Goalsharing F

Y '01 Goal

Achievement 13,000

Budgeted

N/A

Formula 

AR

M

Y

Goalsharing F

Y '95 Net Income 2,500

Net Income $2,250,000

Formula 

INDU

S

TRY

Gainsharing F

Y '01 Cost Savings 60 Client Cost Savings N/

A 1 person 

GOV

W

O

R

K

S "Gainsharing"

F

Y '97 $'s & #'s Awarded 30 10% of Fees

Collected $371,000 1 person 

Benchmarking Award Pro
20 

Appendix 2

Agency Response
Appendix 3 

Status of Recommendations 

Recommendation Status Action Required

1, 2, and 3 Resolved and 

Implemented 

No further response to the Office of Inspector 

General is required. 

21 
How to Report 

Fraud, Waste, Abuse and Mismanagement

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General staff, Departmental employees, and the general public. We actively solicit allegations 

of any inefficient and wasteful practices, fraud, and abuse related to Departmental or Insular 

Area programs and operations. You can report allegations to us by: 

Mail: U.S. Department of the Interior 

 Office of Inspector General 

 Mail Stop 5341-MIB 

 1849 C Street, NW 

 Washington, DC 20240 

Phone: 24-Hour Toll Free 800-424-5081 

Washington Metro Area 202-208-5300 

 Hearing Impaired (TTY) 202-208-2420 

 Fax 202-208-6081 

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Internet: www.oig.doi.gov/hotline_form.html

U.S. Department of the Interior

Office of Inspector General 

1849 C Street, NW 

Washington, DC 20240 

www.doi.gov

www.oig.doi.gov