OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

Audit Report 

Interagency Agreements to 

Use Other Agencies’ Contracts 

Need Additional Oversight

 Report No. 2007-P-00011 

 March 27, 2007 
Report Contributors: John Trefry 

 Nancy Dao 

 Doug LaTessa 

Abbreviations 

DM Decision Memorandum 

DOE U.S. Department of Energy 

Treasury U.S. Department of the Treasury 

EPA U.S. Environmental Protection Agency 

FAR Federal Acquisition Regulation 

GAD Grants Administration Division 

GAO U.S. Government Accountability Office 

IAC Interagency Contract 

IAG Interagency Agreement 

IGCE Independent Government Cost Estimate 

OAM Office of Acquisition Management 

OARM Office of Administration and Resources Management 

OFPP Office of Federal Procurement Policy 

PO Project Officer 
U.S. Environmental Protection Agency 2007-P-00011

Office of Inspector General March 27, 2007

At a Glance


Catalyst for Improving the Environment 

Why We Did This Review 

The U.S. Government 

Accountability Office has

designated management of 

interagency contracting a 

Government-wide high-risk

area since 2005. We sought to 

determine whether the U.S. 

Environmental Protection 

Agency (EPA) effectively

follows interagency

contracting requirements by

ensuring products and services

meet quality, cost, and 

timeliness requirements. 

We also looked into whether 

opportunities exist to improve 

EPA’s processes for managing 

interagency contracts. 

Background 

EPA defines an interagency 

agreement as a written 

agreement between Federal 

agencies under which goods or 

services are provided. 

Interagency contracts are 

contracts awarded by one 

Federal agency but available 

to others for use, generally for 

a fee. 

For further information, 

contact our Office of 

Congressional and Public 

Liaison at (202) 566-2391. 

To view the full report, 

click on the following link: 

www.epa.gov/oig/reports/2007/ 

20070327-2007-P-00011.pdf 

Interagency Agreements to Use Other 

Agencies’ Contracts Need Additional Oversight 

What We Found 

While EPA has improved some interagency contracting processes, we found that 

the Agency entered into some interagency contracts without meeting all 

requirements. EPA often entered into interagency contracts without conducting 

cost reasonableness assessments, or identifying alternatives, such as determining 

whether EPA’s in-house acquisition staff should acquire the services or products 

for them. As a result, we found interagency contracts where EPA could have 

saved money if it had awarded the contracts directly through its in-house 

contracting staff. This occurred because (1) project officers preferred the speed 

and convenience of interagency contracts, received inadequate training, and lacked 

sufficient guidance; and (2) EPA provided limited oversight. 

We found other opportunities for EPA to improve its processes for managing 

interagency contracts. EPA needs to ensure that newly assigned project officers to 

existing interagency contracts receive a complete file for effective contract 

management. Also, EPA did not collect data on the fees paid to other agencies for 

interagency contracts, so costs and benefits could not be determined. 

In addition, we noted positive aspects of the interagency contracting process. 

These involved ordering work within the scope of the existing agreement; project 

officers being satisfied with the quality and timeliness of services; and, in most 

cases, contractor invoices having sufficient information for approval.

 What We Recommend 

We recommend that the Assistant Administrator for the Office of Administration 

and Resources Management: 

• Provide guidance to project officers on conducting cost reasonableness 

assessments and identifying alternatives before using IAG contracts. 

• Strengthen training to include how to develop independent government 

cost estimates or other appropriate cost information, conduct cost 

reasonableness assessments, and identify alternatives. 

• Ensure that the Grants Administration Division requires that the IAG 

decision memorandum better explains why an IAG is more cost effective, 

and include an evaluation of cost reasonableness assessments in reviews. 

EPA generally agreed with our recommendations, but deferred action pending the 

issuance of Government-wide guidance by the Office of Federal Procurement 

Policy. EPA has been informed that a guidance document will be issued in the 

next several months on roles and responsibilities on interagency contracting. 
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

March 27, 2007 

MEMORANDUM 

SUBJECT: Interagency Agreements to Use Other Agencies’ Contracts 

Need Additional Oversight 

Report No. 2007-P-00011 

FROM: Melissa M. Heist 

 Assistant Inspector General for Audit 

TO: Luis A. Luna 

 Assistant Administrator 

 Office of Administration and Resources Management 

This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the 

U.S. Environmental Protection Agency (EPA). This report contains findings that describe the 

problems the OIG has identified and corrective actions the OIG recommends. This report 

represents the opinion of the OIG and does not necessarily represent the final EPA position. 

Final determinations on matters in this report will be made by EPA managers in accordance with 

established audit resolution procedures. 

The estimated cost of this report – calculated by multiplying the project’s staff days by the 

applicable daily full cost billing rates in effect at the time – is $287,000. 

Action Required 

In accordance with EPA Manual 2750, you are required to provide a written response to this 

report within 90 calendar days. You should include a corrective actions plan for agreed upon 

actions, including milestone dates. We have no objections to the further release of this report to 

the public. This report will be available at http://www.epa.gov/oig. 

If you or your staff have any questions regarding this report, please contact me at (202) 566-0899 

or heist.melissa@epa.gov; or Carl Jannetti, the Product Line Director for Contract Audits, at 

(215) 814-5800 or jannetti.carl@epa.gov. 
Interagency Agreements to Use Other Agencies’ Contracts 

Need Additional Oversight 

Table of Contents 

Chapters 

1 Introduction ........................................................................................................... 1 

Purpose .......................................................................................................... 1 

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

 Noteworthy Achievements.............................................................................. 3 

 Scope and Methodology................................................................................. 3 

2 Interagency Agreements to Use Other Agencies’ Contracts 

Need Additional Oversight ................................................................................... 4 

Some IACs Lack Cost Reasonableness Determinations ............................... 4 

Alternatives Not Always Identified .................................................................. 5 

IACs Chosen for Speed and Convenience..................................................... 5 

Impacts of IAC Speed and Convenience ....................................................... 6 

IAC Guidance and Training Limited ............................................................... 6 

Unnecessary IACs Cost EPA Money ............................................................. 7 

Interagency Contract Inappropriately Awarded .............................................. 8 

PO Changes Lack Continuity ......................................................................... 8 

Fees Paid to Servicing Agencies Not Identified.............................................. 8 

IAC Services and Processes Improved ........................................................ 9 

 Recommendations ......................................................................................... 9 

Agency Comment and OIG Evaluation .......................................................... 10 

Status of Recommendations and Potential Monetary Benefits................................. 11 

Appendices 

A Details on Scope and Methodology..................................................................... 12 

B EPA Response to Draft Report ............................................................................ 13 

C Distribution ............................................................................................................ 16 
Chapter 1

Introduction 

Purpose 

Interagency contracts (IACs) are contracts awarded by one Federal agency but 

available to others for use, generally for a fee. We conducted this review to 

determine whether: 

• The U.S. Environmental Protection Agency (EPA) effectively follows 

interagency contracting requirements by ensuring products and services 

meet quality, cost, and timeliness requirements; and 

• Opportunities exist to improve EPA’s processes for managing IACs. 

Background 

According to Federal Acquisition Regulation (FAR), Section 1.102(a), “The 

vision for the Federal Acquisition System is to deliver on a timely basis the best 

value product or service to the customer, while maintaining the public’s trust and 

fulfilling public policy objectives.” This is accomplished by maximizing the use 

of commercial products and services, promoting competition, etc. For example, 

FAR Part 7 requires agencies to perform acquisition planning and conduct market 

research for all acquisitions. FAR Part 10 requires that agencies conduct market 

research appropriate to the circumstances, while FAR Part 6 requires that, with 

certain limited exceptions, the government promote and provide for full and open 

competition when awarding government contracts. 

The U.S. Government Accountability Office (GAO) has reported that in recent 

years, Federal agencies have been making greater use of interagency contracting. 

An agency can enter into an interagency agreement (IAG) with a servicing agency 

to conduct the acquisition on its behalf. EPA defines an IAG as a written 

agreement between Federal agencies under which goods or services are provided 

on a reimbursable basis. An IAG can take a variety of forms, including an IAC 

where EPA uses a contract awarded by another Federal agency, or an agreement 

where another Federal agency uses its staff to provide services to EPA. EPA does 

not uniquely identify IACs from other IAGs, and considers these procurements to 

be IAGs. 

EPA uses several statutory authorities for entering into IAGs. The Economy Act 

is the primary authority for EPA to enter into IAGs with other Federal agencies. 

The Economy Act is designed to further economy and efficiency in government, 

and allows Federal agencies with greater capabilities to provide goods or services 

for other agencies with less experience. For IAGs that cite the Economy Act, a 

Determination and Finding is prepared and signed by the Office of Acquisition 

1 
Management (OAM) to ensure that (1) the project is not being duplicated by 

contractors, (2) the project is in the best interest of government, and (3) the 

supplies or services cannot be obtained as conveniently or economically by 

contracting with a private source. Other statutory authorities EPA uses include 

the Information Technology Management Reform Act and the Government 

Management Reform Act. 

EPA has delegated authority to the Grants Administration Division (GAD) to 

enter into and execute IAGs for the Agency. GAD develops and implements 

Agency-wide administrative policy and procedures for IAGs, including training 

for IAG managers. During the course of our review, EPA issued an Order 

regarding no cost amendments, such as a change of project officers (POs), as well 

as processing invoices and closing out of interagency agreements. GAD also 

reviews and approves all EPA agreements or amendments that originate in 

headquarters and that involve payment or receipt of funds. For IAGs originating 

in EPA regional offices, regional management designates the unit within the 

regional office that is responsible for conducting administrative and financial 

review and management of IAGs. 

EPA designates POs to provide technical and managerial oversight of IAGs. POs 

prepare a Decision Memorandum (DM), which documents the program office’s 

reasons to use an IAG. They also negotiate the terms of the IAG, develop a 

Project Work Plan, manage and evaluate performance, approve payments, and 

assist GAD in closing out the agreements. 

GAO designated management of interagency contracting a Government-wide 

high-risk area in 2005. GAO cited a number of factors that make these types of 

contracts high-risk, including (1) their rapid growth in popularity, along with their 

administration and use by some agencies that have limited expertise with this 

contracting method; and (2) their contribution to a much more complex 

procurement environment, in which accountability has not always been clearly 

established. 

The Office of Management and Budget has also taken an interest in interagency 

contracting. In November 2005, the office established a working group to 

improve the management and use of IACs. The office also began collecting 

information on agencies’ use of these vehicles. For purposes of the Office of 

Management and Budget’s data collection efforts, the office included the 

following as IACs: 

• A Government-wide acquisition contract, as defined in the FAR 2.101; 

• A multi-agency contract as defined in FAR 2.101; 

• A blanket purchase agreement on the Multiple Award Schedules for use 

by multiple agencies; or 

• Other indefinite delivery vehicles with anticipated use by external agencies. 

2 
Noteworthy Achievements 

In recognition of the importance of strengthening the IAG management process to 

meet the goals and objectives of EPA’s strategic plan, EPA issued an order during 

the course of this review regarding no cost amendments, processing invoices, and 

closing out of interagency agreements. This policy includes specific requirements 

to ensure that IAGs are effectively managed. In several cases that we reviewed, 

POs received detailed cost information to support approval of invoices. This is 

noteworthy since, in the past, EPA expressed concern that POs did not have 

detailed cost information to approve invoices timely. Further, the underlying 

contracts, task orders, or programmatic information we obtained indicated that the 

statements of work between EPA and the servicing agencies were within the 

scope of the underlying contracts. 

Scope and Methodology 

We conducted our audit from June 2006 through October 2006 in accordance with 

Government Auditing Standards, issued by the Comptroller General of the United 

States. We selected a judgmental sample of 10 IACs where EPA paid funds to 

another agency to obtain goods or services under their contract. These 10 

Funds-Out IACs were selected from an estimated universe of 157 awarded by 

GAD and EPA regional offices via an interagency agreement. Work ordered 

under the 10 IACs we sampled was valued at $62.9 million, while the universe 

was valued at $178.8 million. One of the procurements selected, valued at 

$2.4 million, did not meet our definition of an IAC and was discarded from our 

sample. The IACs selected were awarded by EPA headquarters and EPA Regions 

1 and 6. We reviewed both the official file maintained by the grants office that 

awarded the IAC as well as the PO file. We interviewed the PO for each IAC in 

our sample, and also interviewed Grants Specialists and OAM staff. Appendix A 

provides further details on our scope and methodology. 

We have not previously reported on the Agency’s use of IACs, but have issued 

reports regarding EPA’s use of IAGs. In June 2001, we issued a report entitled 

Superfund Interagency Agreements, Report No. 2001-P-00011. In September 

2000, we issued a report entitled Follow-Up on Headquarters Interagency 

Agreements, Report No. 2000-P-0029. That report had followed up on findings in 

our March 1995 report, Interagency Agreements: Off-Loading at EPA 

Headquarters, Report No. E1FMG4-13-0061-5400051. 

3 
Chapter 2

Interagency Agreements to Use Other Agencies’ 

Contracts Need Additional Oversight 

EPA program offices often initiated IACs without conducting adequate cost 

reasonableness determinations, or assessing whether EPA’s in-house acquisition 

staff should acquire the services or products for them. This occurred because POs 

preferred the speed and convenience of IACs. Because EPA provided limited 

oversight, inadequate training, and insufficient guidance, program offices used 

IACs without determining if the contracts provided the best value. As a result, 

despite some improvements, EPA lacks assurances that its IACs were an efficient 

approach, considering time and cost. An efficient approach is required by EPA 

guidance. With improved procedures, EPA could have acquired some of the 

services it needed at less cost. 

Some IACs Lack Cost Reasonableness Determinations 

For six of the nine procurements we reviewed, cost reasonableness determinations 

were not adequately performed before using an IAC. EPA program offices can 

use an IAG if it is an efficient approach, considering both time and cost. EPA 

requires that program offices show that the cost of the proposed work is 

reasonable, considering efficiency, based on an Independent Government Cost 

Estimate (IGCE) or other appropriate cost information. These cost determinations 

are to be documented in the program office file and summarized in the decision 

memorandum. 

Table 2-1: Procurements With Inadequate Cost Reasonableness Determinations 

OIG Analysis Project Total 

1. No IGCE developed. No alternatives identified to compare costs. $3.8 million 

2. The DM stated costs were determined reasonable based on 

information developed by PO. No documentation existed to support 

this statement. 

$1.5 million 

3. No DM on file. $7.4 million 

4. The cost was determined reasonable by comparing service fees 

charged by two servicing agencies. The total cost of the project was 

not considered. 

$16.7 million 

5. The DM justified the contract by indicating the servicing agency 

requires its contractors to charge competitive labor rates. The total 

cost of the project was not considered. 

$10.6 million 

6. The DM indicated costs were reasonable because the servicing 

agency awarded its contracts competitively, and cost reasonableness 

was determined then. The cost of the work required by EPA was not 

considered. 

$4.2 million 

Source: EPA decision memoranda, PO files, and interviews with POs. “Project Total” represents 

value at time sample was selected. 

4 
Alternatives Not Always Identified 

Agency guidance requires POs to consider alternatives before deciding to enter 

into an interagency agreement. This consideration is needed to ensure that the 

procurement method used provides the best value to the government. It has been 

a longstanding goal of Federal contracting to promote competition as a means of 

saving money. Discussions with the POs and a review of the DMs disclosed that 

POs did not adequately determine if there were other alternatives available in five 

of the nine IACs we reviewed. 

Table 2-2: Procurements with Inadequate Consideration of Alternatives 

OIG Analysis 

1. No market research conducted to identify alternatives. The original IAC was awarded 

in 1994. Because the program office was concerned about program disruption, it 

renewed the IAC with the same serving agency in 2000 and 2005. 

2. DM indicated regional office initiating this procurement considered several other 

vendors, but concluded they lacked the needed expertise. Documentation was not 

available to support this statement. The purpose of this procurement was to obtain 

photocopying, mailroom, and shipping support for an EPA regional office. While the 

DM considered these vendors unqualified, other Federal agencies and EPA offices 

obtained similar services from the same vendors. 

3. The program office specified it wanted to use a Government-wide acquisition contract, 

but did not indicate why. DM did not address why the services could not be acquired 

directly by EPA’s contracting staff. The Task Order was awarded to the incumbent. 

4. No DM was on file justifying the use of an IAC. 

5. DM did not address why the services could not be acquired directly by EPA’s 

contracting staff. A portion of these services were obtained from a vendor that had 

previously performed similar services for EPA. 

Source: EPA decision memoranda, PO files, and interviews with POs 

IACs Chosen for Speed and Convenience 

Some POs stated that they prefer the speed and convenience of an IAC rather than 

working with EPA’s contracting staff to acquire services directly. They also 

believed that acquiring services through a traditional EPA contract is laborintensive and can take several extra months, while using an IAC can take a matter 

of weeks. The ease of entering into an IAC contributed to the inadequate cost 

reasonableness determinations. For example, project officers believed cost 

reasonableness assessments were unnecessary because the servicing agency 

awarded its contract on a competitive basis, or because contractors are required to 

charge competitive rates. We disagree. EPA needs to evaluate the reasonableness 

of the total cost of the proposed work requested by EPA under an IAC, as well as 

use its own IGCE as a basis for determining cost reasonableness under different 

alternatives. 

Servicing agencies market the speed and convenience of IACs to potential clients. 

For example, the U.S. Department of the Treasury (Treasury) advertises that its 

5 
Franchise Fund1

 offers the service Federal managers need “with the speed, 

autonomy, and convenience” they deserve. Conversely, the convenience and 

autonomy of IACs also increase risk. For example, an EPA contract can last for 

up to 5 years, after which a new contract must be awarded if additional work is 

needed. For two of the nine IACs we reviewed, one had been in place for 7 years, 

and the other had been in place 12 years. 

Impacts of IAC Speed and Convenience 

The speed and convenience of IACs has an associated cost. EPA is generally 

charged a fee when using these contracts. For the IACs we reviewed, the fees 

ranged from no fee to 6.7 percent, and there was often little or no indication that 

EPA’s POs considered using in-house contracting to avoid paying the servicing 

agency a fee. 

IACs have limited oversight. The decision to enter into an IAC is made in the 

program office. Once that decision is made, GAD’s role is primarily an 

administrative function. GAD does not verify the accuracy and completeness of 

the statements made in DMs. GAD does conduct periodic reviews of IACs to 

ensure each element of the DM has been addressed, but does not review the 

documentation supporting the statements made in the DM. 

In addition, POs have not been required to provide supporting documentation for 

their DMs. EPA guidance only requires the DM to include a summary of a 

detailed cost reasonableness determination that is maintained in the program 

office. Cost reasonableness assessment summaries in the DMs were often broad 

and vague, and in several cases there was little or no evidence of the cost 

reasonableness assessment in the project file. 

IAC Guidance and Training Limited 

EPA has developed guidance and training on how to manage the risks of IAGs as 

a whole, but limited guidance exists on managing the risks of IACs. Additional 

guidance and training could help POs manage the risks associated with IACs. 

The training that GAD provided to POs who manage IACs has historically 

focused on managing grants and assistance agreements. Several of the POs we 

interviewed stated that the required training provided by EPA does not adequately 

prepare them to properly oversee their IACs. They consider the training to be a 

general overview of IAGs, rather than a “how to.” For example, although GAD 

guidance requires POs to conduct a cost reasonableness assessment, the guidance 

neither trains POs on how to conduct such assessments, nor how to develop an 

IGCE. Recently, GAD separated its previous training course into a course for 

1

 Franchise Funds were authorized by the Government Management Reform Act of 1994, and created to provide 

common support services required by many Federal agencies. Treasury advertises its Franchise Funds to other 

Federal agencies through promotional materials, such as those found on the Website advertising these services. 

6 
grants and a separate course for interagency agreements. Even with this change, 

many POs managing IACs still consider this training inadequate. 

OAM establishes the policies, procedures, and operations of EPA’s contracts 

management program, and requires staff who manage contracts to attend 

Contracting Officer Representative training. This training is designed to establish 

the foundation needed to effectively manage contracts. As of October 2005, all 

Contracting Officer Representatives at civilian agencies must obtain 40 hours of 

continuous learning every 2 years to keep their certification current. Some 

servicing agencies require EPA POs to be designated as a Contracting Officer 

Representative. GAD needs to require POs of IACs to attend training similar to 

that which is required of Contracting Officer Representatives. 

We reviewed the Performance Appraisal and Recognition System documents of 

the POs managing the IACs in our sample, and found these POs were generally 

not evaluated on how well they managed IACs. GAD recently recognized the 

importance of holding POs of assistance agreements accountable for their 

performance. To accomplish this, GAD developed guidance on formulating 

performance standards for these POs. Similar action needs to be taken to increase 

accountability for POs of IACs. 

Unnecessary IACs Cost EPA Money 

Cost savings are possible by acquiring services directly through EPA contracts 

staff rather than entering into IACs and paying fees to other Federal agencies. For 

example, one EPA regional office contracted for personnel to operate its Mail, 

Copy, and Shipping Department through an IAC with Treasury. Had the regional 

office acquired these services directly, it could have saved almost $217,000. The 

IAC has been in place for 7 years, and we calculated costs savings of 

approximately $31,000 per year. This represents nearly 13 percent of the cost 

incurred through Fiscal Year 2006. 

Treasury awarded the task order for EPA’s mailroom services to a large 

temporary help services company, and charged the regional office a service fee of 

almost 7 percent for use of its contract. EPA’s DM stated that “other agencies 

and vendors considered lacked the expertise required to perform these duties.” 

One source that the regional office considered unqualified was NISH,2

 one of two 

central nonprofit agencies used by the Javits-Wagner-O’Day program.

3 Several 

other EPA offices and Federal agencies acquired similar services through NISH. 

Had the regional office acquired these services directly through nonprofit 

agencies administered by the Javits-Wagner-O’Day program rather than entering 

into an IAC with Treasury, it would have saved money. 

2

 NISH is no longer an acronym, but at one point stood for the National Industries for the Severely Handicapped. 3

 The Javits-Wagner-O’Day program provides employment opportunities for over 45,000 Americans with severe 

disabilities. The program orchestrates Government purchases of products and services provided by nonprofit 

agencies employing disabled individuals. The program recently changed its name to AbilityOne. 

7 
Interagency Contract Inappropriately Awarded 

EPA’s Office of Pollution Prevention and Toxics inappropriately entered into an 

IAC with the U.S. Department of Energy’s (DOE’s) Oak Ridge National 

Laboratory to obtain risk assessments. The laboratory is a Federally Funded 

Research and Development Center that provides other Federal agencies highly 

specialized DOE services and technical expertise. According to FAR 35.017, a 

Federally Funded Research and Development Center may perform work for other 

agencies when the work is not otherwise available from the private sector. These 

requirements are set forth in Federal regulations because it is not the 

Government’s intent that a Federally Funded Research and Development Center 

use its privileged information or access to facilities to compete with the private 

sector. 

The original IAC was awarded in 1994 and renewed in 2000. The program office 

expended $3.4 million to obtain risk assessments under the renewed IAC. In 

2005, the IAC was renewed again with an estimated cost for risk assessments of 

$2 million per year. The Office of Pollution Prevention and Toxics’s justification 

for the IACs indicated that private sector contractors were capable of providing 

the services, but the Oak Ridge National Laboratory was cost effective and had 

highly technical experts on-hand. To corroborate information in the DM, we 

identified existing EPA contracts that provided similar capability at less cost, and 

the PO confirmed that the work acquired through DOE was available from private 

sector contractors. As a result, according to the FAR, the IAC with DOE was 

inappropriate. We estimate that EPA could have saved between 3 and 30 percent 

of the cost of these IACs had the program office procured these services directly. 

It is significant to note that EPA program offices have entered into other IAGs 

with DOE’s Oak Ridge National Laboratory. EPA needs to determine if these 

agreements were also inappropriately awarded. 

PO Changes Lack Continuity 

In some cases, new POs that assumed responsibility for ongoing IACs did not 

receive sufficient information from the previous PO to effectively carry out their 

duties. For example, one PO took over an IAC in March 2005, but did not obtain 

the previous PO’s file until we contacted him in June 2006. In another case, the 

PO’s file did not contain the original executed IAC or DM. His file also did not 

contain several amendments to the IAC and many of the invoices processed by 

the previous PO. 

Fees Paid to Servicing Agencies Not Identified 

EPA does not collect data on the amount of fees paid to other agencies for IACs. 

For the IACs in our sample, GAD could not provide data on the total cost of fees 

paid to servicing agencies. GAD told us that such information is not collected by 

8 
them, and in some cases POs were unaware how much servicing agencies charged 

EPA for the use of IACs. Without such information, EPA cannot effectively 

determine the costs and benefits of interagency contracting. 

IAC Services and Processes Improved 

In February 2000, EPA expressed concern that POs did not have detailed cost 

information to approve invoices timely. In several cases we reviewed, POs 

received detailed cost information to support approval of invoices. EPA provides 

POs with an electronic and hardcopy notification when their approval is needed 

for payments. However, these notifications are in summary form, and do not 

provide the cost details POs need to approve invoices. EPA POs often obtain the 

necessary information from the servicing agency and/or contractor. One 

significant exception was noted. For one IAC, EPA did not receive supporting 

cost information from the servicing agency or the contractor for invoices. Despite 

this lack of information, all invoices – totaling over $2 million – were paid. For 

one invoice, the PO noted in an email that EPA had “...received absolutely 

nothing...” in terms of support for payment of invoices, yet he approved the 

invoice based on a recommendation from another staff member knowledgeable 

about the IAC. 

The statements of work reviewed for IACs in our sample were congruent with the 

statements of work between the servicing agency and its contractors providing the 

work to EPA. The underlying contracts, task orders, or programmatic information 

obtained indicated that the statements of work between EPA and the servicing 

agencies were within the scope of the underlying contracts. 

In most cases, EPA POs were satisfied with the services provided under IACs. 

POs stated that the timelines and quality of the services provided by contractors 

met expectations. 

Recommendations 

We recommend that the Assistant Administrator for the Office of Administration 

and Resources Management: 

1. Provide guidance to project officers for developing IGCEs or other 

appropriate cost information, as well as cost reasonableness assessments. 

These assessments should include an analysis of the fees paid to servicing 

agencies. 

2. Ensure GAD requires that the IAG decision memorandum better explains 

why an IAG is more cost effective, and include an evaluation of cost 

reasonableness assessments in GAD’s oversight reviews of IAG management. 

9 
3. Provide guidance to POs for identifying alternatives to the contracting vehicle 

selected. OAM’s Contracts Management Manual addresses market research 

and should be consulted for guidance. 

4. Strengthen the existing training to include how to develop IGCEs or other 

appropriate cost information, conducting cost reasonableness assessments, and 

identifying alternatives. 

5. Work with program officials to ensure that PO performance standards reflect 

their responsibilities for managing interagency contracts. 

6. Review EPA IACs with Federally Funded Research and Development Centers 

to ensure they were appropriately awarded and develop guidance for program 

offices when considering an IAC with these centers. 

7. Emphasize to program offices the importance of maintaining a complete file, 

and providing a copy to the successor Project Officers as required by the 

recently published EPA Order regarding IAGs. 

Agency Comment and OIG Evaluation 

The EPA Office of Administration and Resources Management (OARM) agreed 

with all but one of our draft report recommendations. For our second 

recommendation, OARM proposed an alternate action that we believe will 

accomplish the intent of our draft report recommendation. Accordingly, we 

modified this recommendation. OARM elected to defer immediate action on 

some of the recommendations pending the issuance of Government-wide 

guidance by OMB’s Office of Federal Procurement Policy (OFPP). OARM staff 

contacted OFPP and was informed that OFPP expects to issue, within the next 

several months, a guidance document on roles and responsibilities on interagency 

contracting and a model interagency agreement. We recognize the interest in 

interagency contracting by OFPP as a result of the work by both GAO and other 

Federal agency inspectors general. We are pleased that OFPP will soon be 

issuing a guidance document on this important area, and agree with EPA in its 

decision to defer implementation of some corrective actions pending the guidance 

document. 

10 
Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Rec. 

No. 

1 

2 

3 

4 

5 

6 

7 

Page 

No.

9 

9 

10 

10 

10 

10 

10 

 Subject 

Provide guidance to project officers for developing 

IGCEs or other appropriate cost information, as 

well as cost reasonableness assessments. These 

assessments should include an analysis of the fees 

paid to servicing agencies. 

Ensure GAD requires that the IAG decision 

memorandum better explains why an IAG is more 

cost effective, and include an evaluation of cost 

reasonableness assessments in GAD’s oversight 

reviews of IAG management. 

Provide guidance to POs for identifying alternatives 

to the contracting vehicle selected. OAM’s 

Contracts Management Manual addresses market 

research and should be consulted for guidance. 

Strengthen the existing training to include how to 

develop IGCEs or other appropriate cost 

information, conducting cost reasonableness 

assessments, and identifying alternatives. 

Work with program officials to ensure that PO 

performance standards reflect their responsibilities 

for managing interagency contracts. 

Review EPA IACs with Federally Funded Research 

and Development Centers to ensure they were 

appropriately awarded and develop guidance for 

program offices when considering an IAC with 

these centers. 

Emphasize to program offices the importance of 

maintaining a complete file, and providing a copy to 

the successor Project Officers as required by the 

recently published EPA Order regarding IAGs. 

Status1 

O 

O 

O 

O 

O 

O 

O 

Action Official 

Assistant Administrator, 

Office of Administration and 

Resources Management 

Assistant Administrator, 

Office of Administration and 

Resources Management 

Assistant Administrator, 

Office of Administration and 

Resources Management 

Assistant Administrator, 

Office of Administration and 

Resources Management 

Assistant Administrator, 

Office of Administration and 

Resources Management 

Assistant Administrator, 

Office of Administration and 

Resources Management 

Assistant Administrator, 

Office of Administration and 

Resources Management 

Planned 

Completion 

Date 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

TBD 

Claimed 

Amount 

Agreed To 

Amount 

1 O = recommendation is open with agreed-to corrective actions pending 

C = recommendation is closed with all agreed-to actions completed 

U = recommendation is undecided with resolution efforts in progress 

11 
Appendix A 

Details on Scope and Methodology 

We reviewed various IAG guidance documents, including IAG Policy documents, the FAR, 

Grants Policy Issuances, EPA Orders, the IAG Policy and Procedures Compendium, the IGCE 

Guide prepared by OAM, and the Office of Federal Procurement Policy’s Policy Letter on new 

training and requirements for Government-wide contracting personnel. 

We reviewed the files for a judgmental sample of 10 Funds-Out IACs open in either Fiscal Year 

2005 or 2006 (see Table A-1). We conducted site visits to GAD headquarters and regional 

offices that awarded these IACs. We coordinated with the Office of 

Grants and Debarment to determine if the POs assigned to our sample 

were certified as POs. We reviewed the DMs and Determination and 

Finding (for Economy Act IACs) to determine whether the decision to 

use an IAC was adequately documented. We reviewed cost 

reasonableness determinations, and any alternatives to the vehicle 

selected identified in the DM. We reviewed all available underlying 

contracts, task orders, or programmatic information for the IACs in our 

sample to determine whether the statement of work for the IAC was 

within the scope of the underlying contract awarded by the servicing 

agency. 

We also reviewed invoices billed to determine the fees charged by the 

servicing agency and whether the invoices were adequately supported by 

cost details. We reviewed the GAD protocol used and the results of a 

 Table A-1: Sampled 

 Interagency Contracts 

DW - 97-93986601 

DW - 75-93823701 

DW - 89-93882001 

DW - 96-93890501 

DW - 47-92220701 

DW - 13-93882401 

DW - 96-94030701 * 

DW - 47-94009901 

DW - 20-95031301 

DW - 47-95036401 

* Discarded because 

it did not meet the 

definition of an IAG. 

Source: EPA’s GAD 

Comprehensive Grants Management Review conducted by GAD. For one IAC, we reviewed 

EPA’s database of existing contracts to determine if there were EPA contracts that contained a 

similar statement of work. We confirmed this information with EPA Contracting Officers, and 

reviewed cost information for these existing contracts to determine whether potential cost 

savings could have been realized had EPA acquired the services directly. We reviewed 

Performance Appraisal and Recognition System agreements to determine if it included PO 

responsibilities for managing IACs. 

Internal Control Structure 

In planning and performing this audit, we reviewed management controls related to our audit 

objective. This included EPA’s policy and procedures for administering and managing the IACs 

issued by the EPA Office of Grants and Debarment. As part of this review, we examined EPA’s 

Fiscal Year 2005 Federal Managers’ Financial Integrity Act Annual Assurance Letters issued by 

the EPA Assistant Administrator for the Office of Administration and Resources Management. 

In April 2005, the Agency conducted an internal IAG file review and reviewed open and closed 

IAGs in IGMS; and reviewed PO designations, training, and certifications. The review noted 

potential vulnerabilities in the IAG files and close-out of outstanding open IAGs. The Agency 

has begun to address the issues to ensure that all files are in compliance with Agency guidance 

and policy and that open IAGs are monitored and closed out within required timeframes. 

12 
Appendix B 

EPA Response to Draft Report 

MEMORANDUM 

SUBJECT: Draft Audit Report: 

 Interagency Agreements to Use Other Agencies’ Contracts 

Need Additional Oversight 

(Assignment No. 2006-001052, February 14, 2007) 

FROM: Luis A. Luna 

 Assistant Administrator 

TO: Carl A. Jannetti 

 Director, Contract Audits 

Thank you for the opportunity to provide our comments and perspectives on the 

Draft Audit Report. I am pleased that the Report recognizes the steps EPA has taken to 

improve its administration of interagency agreements (IAGs). This includes the recent 

issuance of EPA Order 1610, which will strengthen the Agency’s management of IAG 

no-cost amendments, invoices and close-out. I am also pleased with the Report’s 

conclusions about the timely, quality work performed under interagency contracts 

supported by IAGs and the availability of sufficient information for IAG invoice 

approval. 

The Report contains a number of other findings regarding the oversight of IAGs 

involving interagency contracts. Specifically, it finds that in some cases the Agency may 

have entered into some of these IAGs without conducting cost reasonableness 

assessments, or identifying alternatives, such as determining whether EPA’s in-house 

acquisition staff could acquire the services/products at a lower cost. Additionally, the 

Report concludes that newly assigned project officers to existing interagency contracts 

did not always receive a complete file for effective contract management and EPA did 

not collect data on the interagency contract fees paid to other agencies. 

The Report presents seven recommendations to address these findings. OARM’s 

response to these recommendations is presented below. 

Recommendation #1: Provide guidance to project officers for developing appropriate 

cost information, as well as cost reasonableness assessments, including an analysis of the 

fees paid to servicing agencies. 

13 
OARM Response: OARM agrees with this recommendation, but will defer immediate 

action pending the issuance of government-wide guidance by the Office of Federal 

Procurement Policy (OFPP). OARM staff has contacted OFPP and has been informed 

that they expect to issue, within the next several months, a guidance document on roles 

and responsibilities on interagency contracting and a model interagency agreement. 

Recommendation #2: Ensure that the Grants Administration Division (GAD) reviews 

cost reasonableness assessments. 

OARM Response: OARM disagrees with this recommendation. GAD should not 

routinely review cost reasonableness assessments, since the preparation and review of 

those assessments is a program office responsibility. However, GAD will: (1) require the 

IAG decision memorandum submitted by program offices to better explain why an IAG 

is more cost-effective; (2) include an evaluation of cost reasonableness assessments in 

GAD’s oversight reviews of IAG management; and (3) incorporate, as appropriate, the 

expected OFPP guidance in the Agency’s IAG procedures. 

Recommendation #3: Provide guidance to Project Officers (POs) for identifying 

alternatives to an IAG. 

OARM Response: OARM agrees with this recommendation, but will defer immediate 

action pending issuance of the OFPP guidance. 

Recommendation #4: Strengthen existing training to include how to develop appropriate 

cost information, conduct cost reasonableness assessments, and identify alternatives. 

OARM Response: OARM agrees with this recommendation, but will defer making 

major training changes pending issuance of the OFPP guidance. 

Recommendation #5: Work with program officials to ensure that PO performance 

standards reflect their responsibilities for managing IAGs. 

OARM Response: OARM agrees with this recommendation and will work with Senior 

Resource Officials to ensure that IAG responsibilities are referenced, as appropriate, in 

PO performance agreements as part of the 2008 Performance Assessment Rating System 

process. 

Recommendation #6: Review EPA IAGs with Federally Funded Research and 

Development Centers to ensure they were appropriately awarded and develop guidance 

for program offices when considering an IAG with these centers. 

OARM Response: OARM agrees with this recommendation and will work with the 

Office of General Counsel to develop the necessary guidance. 

14 
Recommendation #7: Emphasize to program offices the importance of maintaining a 

complete file, and providing a copy to their successor as required by the recently 

published EPA Order. 

OARM Response: The Office of Grants and Debarment (OGD) will continue to 

emphasize the importance of this requirement in its project officer training on EPA Order 

1610. 

Thank you for the opportunity to comment on the Report. If you have any 

questions about these comments, please contact Howard Corcoran, Director, OGD, at 

(202) 564-1903. 

cc: Senior Resource Officials 

 Grants Management Officers 

Junior Resource Officials 

 Richard Kuhlman 

 Steve Pressman 

 Richard Feldman 

Kenneth Redden 

Chuck Gherardini 

Bruce Binder 

Jeanne Conklin 

John Nolan 

Laurice Jones 

15 
Appendix C 

Distribution 

Office of the Administrator 

Assistant Administrator for Administration and Resources Management 

Director, Office of Grants and Debarment 

Director, Grants Administration Division 

Director, Office of Regional Operations 

Regional Administrator, Region 1 

Regional Administrator, Region 6 

Agency Followup Official 

Agency Followup Coordinator 

Audit Followup Coordinator, Office of Administration and Resources Management 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for Public Affairs 

Acting Inspector General 

16