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Performance Audit Report

The SBA’s 417 Unauthorized Commitments Impacted
 

Mission‐Related Services and Increased Costs
 

March 28, 2013 Report Number 13‐14
     

       

     

   

       

                 

   

               

                             

                        

                                  

                       

             

                                

         

                               

                            

                              

                                          

                                  

                                

                                       

                

     

     

         

U.S. Small Business AdministraƟon
 

Office of Inspector General
 

Washington, D.C. 20416
 

ÙÖÊÙã ãÙÄÝÃ®ãã1⁄2 

RÖÊÙã NÊ. 13‐14

DATE:	 March 28, 2013

TO:	 Jonathan I. Carver

Chief AcquisiƟon Officer and Chief Financial Officer

Ýç1ã:	 Review of the Small Business AdministraƟon’s Unauthorized Commitments 

This report presents the results of our audit, Review of the Small Business AdministraƟon’s Unauthorized 

Commitments. The objecƟve of this audit was to determine the extent and reasons unauthorized

commitments occurred. We determined that the SBA received invoices associated with over 400 unauthorized

commitments valued at more than $1.4 million between November 2010 and May 2012. We believe the large

number of unauthorized commitments indicates problems with the organizaƟonal culture of the acquisiƟon pro‐

cess and contract management at the SBA.

Please provide your response to this report for each recommendaƟon on the aƩached SBA Form 1824s,

RecommendaƟon AcƟon Sheets, by April 29, 2013.

Consistent with OMB Circular A‐50, your response should include the correcƟve acƟon(s) taken or planned for

each recommendaƟon and the target date(s) for compleƟon. If you disagree with the recommendaƟons, please

fully explain the reasons for disagreement. Please include the legal basis for disagreement based on interpreta‐

Ɵon of the law, regulaƟons, or the authority of officials to take or not to take acƟon. You may also propose alter‐

naƟve acƟons to those recommended that you believe would beƩer address the issues presented in this report.

We appreciate the courtesies and cooperaƟon of the Office of the Chief Financial Officer and the AcquisiƟon

Division during this audit. If you have any quesƟons concerning this report, please call me at (202) 205‐7390 or

Riccardo Buglisi, Director, Business Development Programs Group, (202) 205‐7489.

***

/s/ originally signed

John K. Needham

Assistant Inspector General for AudiƟng

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ExecuƟve Summary: The SBA’s 417 Unauthorized Commitments

Impacted Mission‐Related Services and Increased Costs

March 28, 2013

Report Number 13‐14

What OIG Evaluated

This report presents the results of the OIG’s audit

of the SBA’s unauthorized commitments. We

conducted this audit in response to an OIG hotline

complaint about the large number of unauthorized

commitments occurring at the SBA. An unauthorized

commitment occurs when a government official

authorizes products or services without the necessary

authority. The objecƟve of this audit was to deter‐

mine the extent of the unauthorized commitments

and why they occurred. To achieve our objecƟve, we

obtained documents and interviewed the AcquisiƟon

Division personnel to determine the number of unau‐

thorized commitments. We also determined how the

AcquisiƟon Division idenƟfied and processed these

unauthorized commitments. We reviewed contract

files for unauthorized commitments associated with

nine selected vendors. We chose vendors based upon

the total dollar value and total number of unauthor‐

ized commitments associated with that company. We

also interviewed agency officials from the Office of the

Chief Financial Officer (OCFO) and the Office of

General Counsel.

OIG RecommendaƟons and Agency Comments

The OIG recommended a total of seven acƟons:

one acƟon directed to the SBA Administrator and

six directed to the Chief AcquisiƟon Officer in coordi‐

naƟon with the Senior Procurement ExecuƟve. We

believe these acƟons will improve contract manage‐

ment at the SBA and significantly decrease the total

number of future unauthorized commitments. On

January 24, 2013, we provided a draŌ report to SBA

management for official comment. On March 4, 2013,

we received comments from the Chief Financial

Officer—who is also the Chief AcquisiƟon Officer. On

March 13, 2013, we received comments from the

Office of General Counsel on behalf of the SBA Admin‐

istrator. Management was responsive to four recom‐

mendaƟons, and non‐responsive to three recommen‐

daƟons.

What OIG Found

Between November 2010 and May 2012, the SBA

received invoices associated with 417 unauthorized

commitments—more than $1.4 million in inappropri‐

ately expended Agency funds. Federal regulaƟons

state that an unauthorized commitment is an agree‐

ment between a vendor and a government repre‐

sentaƟve that is not binding solely because the

Government representaƟve who made the commit‐

ment lacked the authority to enter into that agree‐

ment on behalf of the Government. AddiƟonally, the

total number of unauthorized commitments at the

SBA in the last two fiscal years greatly exceeded the

total number of unauthorized commitments at six oth‐

er federal agencies of a similar size.

The large number of unauthorized commitments

directly impacted the ability of the Agency to legally

and efficiently procure goods and services for its daily

operaƟons and limited its ability to provide needed

support to small businesses. Also, the process of raƟ‐

fying the large number of unauthorized commitments

required addiƟonal staff resources and increased oper‐

aƟng costs for the AcquisiƟon Division.

The AcquisiƟon Division has taken steps to prevent

future unauthorized commitments including

(1) decreasing the turnover rate in the AcquisiƟon Divi‐

sion personnel, and (2) providing training to Program

Office staff that parƟcipate in the acquisiƟon process.

AddiƟonally, in fiscal year 2012, the SBA developed its

first Advanced AcquisiƟon Plan in five years, which

documents the SBA’s planned acquisiƟons for an

upcoming fiscal year. While the SBA conƟnues to

make strides toward improving the acquisiƟon process

and prevenƟng unauthorized commitments, transfor‐

maƟon of the culture needs to occur so that changes

can be sustained in the future. In order to implement

a successful culture change, the SBA needs to hold its

employees accountable for their acƟons, have detailed

policy and guidance readily accessible to all of its em‐

ployees, and provide meaningful acquisiƟon training

to all employees.

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Table of Contents
 

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

Roles of ContracƟng Officers and ContracƟng Officer’s RepresentaƟve in Unauthorized
 

Finding: The SBA’s Unauthorized Commitments Impacted Mission‐Related Services and Increased
 

The SBA’s Unauthorized Commitments Occurred Across Various Types of Products and
 

Unauthorized Commitments at the SBA Far Exceeded Those Occurring at Other Similarly‐Sized
 

Mission‐Related FuncƟons and Other Agency AcƟviƟes Impacted by Unauthorized
 

Finding: PrevenƟng Future Unauthorized Commitments Requires a ShiŌ in Agency Culture to Sustain
 

Sustaining Changes Will Requires Improved Accountability, Planning, Guidance, and Training to
 

Appendix V: Unauthorized Commitments and RaƟficaƟon Guidance from Other Federal
 

Re‐ConsƟtuƟng of the AcquisiƟon Division....................................................................................... 5
 

Commitments.................................................................................................................................... 5
 

Costs......................................................................................................................................................... 7
 

Services.............................................................................................................................................. 7
 

Agencies............................................................................................................................................. 7
 

Commitments.................................................................................................................................... 7
 

RaƟficaƟon Process Diverted Staff and Increased OperaƟng Costs for the AcquisiƟon Division...... 8
 

Recent Changes...................................................................................................................................... 10
 

Steps to Improve the AcquisiƟon Process at the SBA Are Underway ............................................. 10
 

Transform Culture ........................................................................................................................... 10
 

Conclusions ............................................................................................................................................ 13
 

RecommendaƟons................................................................................................................................. 13
 

Agency Comments and OIG Response................................................................................................... 14
 

Appendix I: Scope and Methodology ..................................................................................................... 21
 

Appendix II: Unauthorized Commitments—Frequently Asked QuesƟons ............................................ 23
 

Appendix III: Contract Management RegulaƟons and EffecƟve PracƟces............................................. 27
 

Appendix IV: ContracƟng Officer’s RepresentaƟve DuƟes and ResponsibiliƟes ................................... 31
 

Agencies................................................................................................................................................. 33
 

Appendix VI: Agency Comments—SBA General Counsel for the SBA Administrator........................... 35
 

Appendix VII: Agency Comments—Chief AcquisiƟon Officer and Senior Procurement ExecuƟve....... 36
 

4 Report Number 13‐14
     

                         

                 

                  

                 

               

               

             

           

           

              

             

                

                 

       

            

           

          

      

  

         

         

              

       

               

               

      

             

                 

                  

           

                    

         

               

             

             

               

            

               

              

                   

             

          

                 

         

                         

              

               

     

                  

         

           

              

               

             

                

        

         

            

                 

   

               

               

                  

              

            

                 

                 

           

            

               

   

          

           

                  

               

               

                  

   

              

   

Background
 

This report presents the results of our audit of the

Small Business AdministraƟon’s (SBA or the Agency)

unauthorized commitments. We conducted this audit

in response to an OIG hotline complaint about the

large number of unauthorized commitments occurring

at the SBA. We previously issued Advisory

Memorandum 12‐221 during this audit to inform SBA

officials about the raƟficaƟon process used to approve

the unauthorized commitments, which warranted

review prior to the issuance of our full report.

Re‐ConsƟtuƟng of the AcquisiƟon FuncƟon

The SBA’s acquisiƟon funcƟon has undergone signifi‐

cant change. According to AcquisiƟon Division staff, a

2009 study revealed that the internal acquisiƟon and

procurement processes at the SBA had serious perfor‐

mance issues when located within the Division of

Procurement and Grants Management (DPGM). The

report, according to AcquisiƟon Division staff, recom‐

mended that DPGM cease providing acquisiƟon

services and that the SBA establish a new program

division.

The SBA moved the enƟre AcquisiƟon Division from

Washington, DC, to the Denver Finance Center (DFC)

in October 2010. AddiƟonally, the SBA hired all new

contracƟng staff, except for two individuals who

remained at Headquarters. Specifically, the transiƟon

to the DFC intended to: (1) separate the AcquisiƟon

Division from Program Office staff, (2) signify that the

AcquisiƟon Division’s independence, and (3) place

more emphasis on the AcquisiƟon Division’s role

versus the Program Offices’ roles in the acquisiƟon

process.

By January 2011, the re‐consƟtuted AcquisiƟon

Division began performing acquisiƟon funcƟons for

the SBA. When the SBA received its fiscal year 2011

budget in May 2011, the new AcquisiƟon Division

awarded 60 percent of the Agency’s contracts before

the end of the fiscal year—nearly $78 million in

contracts.

However, as a result of the move to the DFC, a gap in

contract services occurred due to high turnover of the

DPGM staff related to the move. This gap in services

resulted in a large number of contracts not being

awarded prior to the performance period required by

the Program Offices that had requested the contracts

(or purchases). The AcquisiƟon Division also inherited

numerous problems from the previous acquisiƟon

funcƟon including a large number of unauthorized

commitments made by various SBA Program Offices.

AddiƟonally, the OIG idenƟfied the SBA’s acquisiƟon

process as a Management Challenge in October 2012.

Our previous work showed that while the Agency has

made improvements, conƟnuing challenges exist, in‐

cluding (1) improper funding of contracts, (2) inade‐

quate oversight, and (3) outdated guidance.

Roles of ContracƟng Officers and

ContracƟng Officer’s RepresentaƟves in

Unauthorized Commitments

Generally, an unauthorized commitment occurs when

a Government employee approves and accepts prod‐

ucts or services without the appropriate authority.

Unauthorized commitments violate regulatory and

ethics standards, and legal and disciplinary acƟon may

be taken against any employee who makes an unau‐

thorized commitment. The only Government employ‐

ee authorized to commit the Government to receiving

and paying for products or services is a warranted

ContracƟng Officer (CO). The CO ensures that all laws,

regulaƟons, and other applicable procedures have

been met in order to protect the interests of the

Federal Government.

The COs appoint ContracƟng Officer’s RepresentaƟves

(COR) who serve as the Agency’s representaƟve to

monitor and administer contracts, but with very spe‐

cific limitaƟons. Any Government employee can be

appointed and cerƟfied as a COR—who also maintains

the appropriate cerƟficaƟon through required training.

Importantly, CORs cannot make changes to the scope,

price, schedule, terms, and condiƟons of the contract.

1 SBA‐OIG Advisory Memorandum 12‐22, The SBA’s RaƟficaƟon Process May Lead to Possible AnƟ‐Deficiency Act ViolaƟons issued September

28, 2012.

5 Report Number 13‐14
     

                   

         

              

                 

           

       

             

                 

                  

   

           

When a COR, and not the CO, makes commitments or

changes to the contract, an unauthorized commitment

will occur. Further, when a COR authorizes products

or services to be provided without a valid contract in

place, an unauthorized commitment will also occur.

Agencies can remedy an unauthorized commitment

through the process of raƟficaƟon, which approves

the products or services so that related invoices can

be paid. However, raƟficaƟon should not be used in a

manner that encourages unauthorized commitments

to be made by Government employees.

***

6 Report Number 13‐14
     

         

                                 

                                        

            

  

         

          

         

   

         

                 

            

                

        

                

                  

                  

                 

                  

         

           

        

        

         

           

          

                 

                

               

            

       

               

                

               

                     

                 

              

                 

              

               

                 

                  

                 

                   

      

           

  

             

           

            

               

         

                   

              

               

                     

               

          

               

                  

           

             

  

  

     

      

  

      

  

   

  

     

   

   

   

   

       

SBA’s Unauthorized Commitments Impacted
 

Mission‐Related Services and Increased Costs
 

The SBA’s Unauthorized Commitments

Occurred Across Various Type of Products

and Services

The SBA received 417 invoices associated with unau‐

thorized commitments totaling more than $1.4 million

between November 2010 and May 2012. The Acquisi‐

Ɵon Division received invoices for products or services

associated with expired contracts—someƟmes expired

for more than one year—and invoices where a new or

expired contract did not exist. Furthermore, these

invoices were for products and services provided to

the SBA without a valid contract in place for the work

ranging from copier and Blackberry services to training

support. Not only did the unauthorized commitments

vary by product and service, they occurred across mul‐

Ɵple SBA Program Offices. See Table 1 for a break‐

down of the specific types of unauthorized commit‐

ments and the associated products or services.

Table 1 Unauthorized Commitments, by Type

Products or

Services Received

by the SBA

Total Number of

Unauthorized

Commitments

Total Value of

Unauthorized

Commitments

IT Support Services 2 $437,950.33

Copier Services 177 $341,046.23

Blackberry

Services 3 $145,201.40

IT Data Storage

and Back‐Up 1 $139,584.69

Training Support 3 $91,199.33

Credit Reports 44 $67,045.57

Postage Meters 134 $63,624.50

Others 53 $125,092.74

Unauthorized Commitments at the SBA Far

Exceed Those Occurring at Other Similarly‐

Sized Agencies

The SBA’s total number of unauthorized commitments

for the last two fiscal years substanƟally exceeded the

total number of unauthorized commitments at six

federal agencies of similar size. When comparing the

SBA’s unauthorized commitments to other small

federal agencies with a similar contract porƞolio, the

six selected agencies had a total of 10 unauthorized

commitments in the last two fiscal years. Further, we

spoke with COs recently employed by the SBA who

stated that they had never directly dealt with any

unauthorized commitments at the other federal agen‐

cies in which they have previously worked.

Mission‐Related FuncƟons and Other

Agency AcƟviƟes Impacted by

Unauthorized Commitments

The number of unauthorized commitments directly

impacted the SBA’s ability to perform mission‐related

funcƟons and other day‐to‐day acƟviƟes. For exam‐

ple, by not properly planning for contracts, the SBA

directly impacted the ability of SBA employees to

perform acƟviƟes to meet its mission of supporƟng

small businesses. For example, the prior contract for

the Business Development Management InformaƟon

System2 (BDMIS) expired without a new contract in

place, and the vendor correctly took BDMIS offline.

Subsequently, when responding to a press inquiry, the

SBA stated that the BDMIS was not available due to a

technical glitch, when in fact the reason for the

“glitch” was that the contract had expired.

The SBA could not award an opƟon year before the

expiraƟon of the exisƟng contract because the

Program Office did not provide noƟce to the Acquisi‐

Ɵon Division that it intended to exercise an opƟon

year in its contract. Further, the Program Office did

not provide the required funding for the contract. In

addiƟon, while trying to award an opƟon year for the

2 The Business Development Management InformaƟon System is a web‐based system for submission and processing of applicaƟons for cerƟfi‐

caƟon under the 8(a) Business Development Program. This system also provides for the processing of annual reviews submiƩed by the 8(a)

firms and processed by the SBA District Offices.

7 Report Number 13‐14
     

             

                   

                   

                

                

             

             

              

        

             

               

            

            

              

                     

                 

            

     

               

                  

               

           

              

                 

                 

             

                

       

       

                 

             

                

             

                 

                  

               

               

            

                 

               

   

        

          

  

             

                

                 

              

     

             

                 

           

               

           

       

             

               

           

         

             

              

                     

             

        

                   

              

                   

          

                 

        

                 

           

                 

         

Figure 1 News Account of BDMIS “Glitch”

SBA system glitch leaves small firms unable to apply

for 8(a) cerƟficaƟon—Washington Business Journal

“Contractors hoping to apply for the Small Business 

AdministraƟon’s 8(a) program for small disadvantaged 

businesses are out of luck unƟl at best mid‐week, when 

the SBA expects to have its online applicaƟon back up 

and running. 

Apparently, the Business Development Management 

InformaƟon System—which small businesses use to 

apply for cerƟficaƟon in the 8(a) Business Development 

Program and provide annual updates for conƟnued 

eligibility—has been down since Nov. 2 due to a 

technical glitch.” 

Source: Washington Business Journal, SBA system glitch leaves small 

firms unable to apply for 8(a) cerƟficaƟon, November 7, 2011

BDMIS, a senior program official stated in an email to

the CO that while s/he knew the contract had expired

and recognized the vendor’s rights not to provide

services, s/he had hoped that the AcquisiƟon Division

would have “encourage[d] the contractor to conƟnue

to perform [services].” Had the contractor conƟnued

to provide services as the official requested, an

unauthorized commitment would have occurred.

Moreover, with this request, the senior official inap‐

propriately asked a CO to violate federal regulaƟons

dictaƟng their contract authority and designated

warrant so that services could conƟnue. Importantly,

not tracking the period of performance on this

contract, the COR put the mission of the Agency at risk

and allowed an essenƟal small business service to be

unavailable. Since at least FY 2011, unauthorized com‐

mitments supported important mission‐related func‐

Ɵons and other operaƟonal acƟviƟes in the Program

Offices. Because there was no valid contract in place

for those products or services, vendors should have

disconƟnued services when the period of performance

expired. If services were disconƟnued, the Agency

would have lost essenƟal tools that keep the SBA run‐

ning on a daily basis, including Blackberry, copier, and

postage meter services in Headquarters and District

Offices throughout the country. For example, when a

contract for copiers is about to expire, the Program

Office staff must submit an “AcquisiƟon Package” to

the AcquisiƟon Division. This must be submiƩed by

the recommended submission date to award a new

contract or exercise an opƟon year before the end

performance date on the current contract. If this step

is not completed, the AcquisiƟon Division may not

have enough Ɵme to award a new contract by the

needed performance date. By not awarding a new

contract or invoking an opƟon year for the service,

once the contract expires, any acceptance of copier

services becomes an unauthorized commitment.

RaƟficaƟon Process Diverted Staff and

Increased OperaƟng Costs for the

AcquisiƟon Division

In May 2012, the SBA’s AcquisiƟon Division staff 

updated a raƟficaƟon template. The intent of the

template was to streamline the process used to ensure

the AcquisiƟon Division’s compliance with all seven

requirements for raƟfying unauthorized commitments

in accordance with the FAR. AcquisiƟon Division

officials stated that they needed to raƟfy all of the

unauthorized commitments as quickly as possible so

they could focus on performing the more immediate

or necessary contracƟng funcƟons. With criƟcal

resources dedicated to raƟfying unauthorized commit‐

ments, AcquisiƟon Division staff could not focus solely

on criƟcal Agency needs and funcƟons, which further

delayed the acquisiƟon process. Each raƟficaƟon

process required Ɵme and staff resources that would

have otherwise been directed toward awarding new

contracts for the Agency. Between November 2010

and May 2012, the SBA had raƟfied or closed out 241

invoices; however, 176 invoices sƟll remained in the

raƟficaƟon process. The AcquisiƟon Division staff esƟ‐

mated that the raƟficaƟon of 1 to 2 invoices required

the involvement of 17 employees involved in the

process with a combined total of 31 hours to complete

the raƟficaƟon. AddiƟonally, this “simple” raƟficaƟon

cost the SBA approximately $1,500.00 per one to two

invoices received. For more complex raƟficaƟons—

such as the team combining all the invoices associated

with a parƟcular vendor—the cost and required Ɵme

8 Report Number 13‐14
     

        

                      

                  

          

            

              

                   

                

   

                 

                 

            

from employees increased. The AcquisiƟon Division

esƟmated that a complex raƟficaƟon required 17

employees a combined total of 127 hours, and a total

cost of more than $6,000.00. For example, the raƟfi‐

caƟon process for unauthorized commitments associ‐

ated with one vendor that provided copier services to

the Agency began in August 2011 and took acquisiƟon

staff at least 11 months to complete.

Table 2 Comparison of Costs for a Simple and

Complex RaƟficaƟon at the SBA

Total

Type of Employees Hours

RaƟficaƟon Involved Required Total Cost

Simple 17 31 $1,535.17

Complex 17 127 $6,253.39

Source: AcquisiƟon Data about the EsƟmated Cost of

RaƟficaƟon

***

9 Report Number 13‐14
     

       

               

                

               

       

             

                 

   

               

               

               

         

               

                 

            

              

   

               

               

                   

              

              

             

               

               

                  

           

             

            

       

     

         

              

                 

             

        

               

               

             

       

               

       

           

            

                

             

             

                

               

                  

                

          

             

                 

             

               

          

          

       

       

                 

             

   

               

                    

            

               

               

                     

                   

       

               

         

                 

             

             

             

PrevenƟng Future Unauthorized Commitments Requires

a ShiŌ in Agency Culture to Sustain Recent Changes

Steps to Improve the AcquisiƟon Process at

the SBA Are Underway

According to SBA officials, the AcquisiƟon Division has

taken steps to prevent unauthorized commitments

from re‐occurring, and to raƟfy all previous unauthor‐

ized commitments. The SBA officials stated that

efforts include decreasing the turnover rate in the

AcquisiƟon Division staff, and providing training to

Program Office staff that parƟcipate in the acquisiƟon

process. AddiƟonally, in FY 2012, the SBA developed

an Advanced AcquisiƟon Plan—the first one in five

years. This plan lists all of the SBA’s planned acquisi‐

Ɵons for an upcoming fiscal year based upon

Advanced AcquisiƟon Strategies submiƩed by the

Program Offices. Further, the Agency increased the

number of contracts awarded in the second and third

quarters to decrease the “year‐end crunch” and imple‐

mented an invoice noƟficaƟon system to decrease the

amount of interest penalƟes incurred.

Sustaining Changes Will Require Improved

Accountability, Planning, Guidance, and

Training to Transform Culture

While SBA officials stated that strides have been made

toward improving the SBA acquisiƟon process and

prevenƟng future unauthorized commitments, trans‐

forming the organizaƟonal culture needs to occur so

that changes can be sustained in the future. Culture is

the underlying assumpƟons, beliefs, values, and

aƫtude shared by its employees and directly impacts

their behavior. The SBA has been struggling with

changing its culture since at least 2009, and there is a

recognized need to change the culture in the way the

SBA does acquisiƟon.

The following examples provided by the COs illustrate

the pracƟces of program management that override

the system and impair the integrity of the acquisiƟon

process:

	 For one contract, the Program Office contacted

the vendor to obtain a quote and consequently

developed the Statement of Work to directly

match the quote received. ContacƟng a vendor in

this manner prior to solicitaƟon is a direct viola‐

Ɵon of contract regulaƟons.

	 One vendor provided services on two occasions

for a Program Office prior to a contract being

awarded.

	 Program Office staff pressured a CO to award a

contract by a parƟcular date because they had

already arranged a meeƟng with the vendor prior

to the contract being awarded.

	 Vendors provided services to the SBA without a

valid contract in place because that was how the

SBA conducted business. The vendor would even‐

tually be awarded a contract and receive

payment.

Successfully changing the culture at the SBA requires

that: (1) Agency management be commiƩed to the

change in both words and acƟon; and (2) the Agency

provide training that promotes and develops skills

related to its desired values and beliefs. Specifically,

the SBA needs to hold its employees accountable for

their acƟons, have detailed policy and guidance readily

accessible to all of its employees, and provide mean‐

ingful acquisiƟon training to all employees.

Accountability

EffecƟve programs hold employees accountable for 

their acƟons by linking those acƟons to performance 

raƟngs or other administraƟve acƟons, if necessary. 

When an unauthorized commitment occurs, the SBA

can take administraƟve, financial, or legal acƟon

against the SBA employee(s). AddiƟonally, when an

unauthorized commitment occurs, the government

employee violates the Standards of Ethical Conduct for 

Employees of the ExecuƟve Branch, and may be held

personally liable for such commitments. However, our

review indicates that the SBA has not taken acƟon

against any SBA employee who improperly commiƩed

the Government. Furthermore, if an unauthorized

commitment cannot be raƟfied, the vendor can take

legal acƟon against the employee to obtain payment

10	 Report Number 13‐14
     

               

     

                 

         

             

             

              

     

                     

               

     

                 

             

            

         

               

                 

               

              

           

   

             

            

           

            

           

          

             

                 

         

   

             

     

     

              

            

           

             

          

            

            

           

         

               

                

               

                    

                

             

             

                

  

     

         

                

                

            

                 

           

                 

              

           

                 

               

for the total value of the unauthorized commitment.

Moreover, an effecƟve performance management

system can be used to drive internal change and

achieve desired results. Linking performance to

Agency goals and core values reinforces individual

accountability for results and helps create cultural

change. By implemenƟng a unified Agency goal of

eliminaƟng the unauthorized commitments that occur

at the SBA, the Agency can then directly link that goal

to individual performance and applicable raƟngs of all

employees—including SBA managers.

Planning and Guidance

EffecƟve planning and guidance is an important 

element of results‐oriented framework; it helps to 

clarify prioriƟes, unify the Agency in pursuit of 

common goals, and facilitate services. 

Since the creaƟon of the new AcquisiƟon Division, the

SBA has developed more guidance related to acquisi‐

Ɵon planning. However, exisƟng guidance specific to

unauthorized commitments is limited, and the Stand‐

ard OperaƟng Procedure (SOP) for contracts has not

been updated in 28 years. Updated guidance for

employees and managers related to the Agency’s goal

of decreasing the total number of unauthorized

commitments would signify the importance of pre‐

venƟng future unauthorized commitments.

Current agency guidance does not define an unauthor‐

ized commitment, outline the significance of the

acƟon, or provide examples on prevenƟng unauthor‐

ized commitments. The SBA’s SOP about government

contracts only includes limited informaƟon on raƟfica‐

Ɵon and states that, “individuals not delegated

authority to obligate the government have been

known to aƩempt to commit the government or have

work performed without contracƟng officer authoriza‐

Ɵon.”

AlternaƟvely, some other federal agencies have more

detailed guidance outlining unauthorized commit‐

ments and raƟficaƟon—see Appendix V. These guides

vary from detailed secƟons about unauthorized

commitments and raƟficaƟon in the agencies’ acquisi‐

Ɵon procedures and guidelines, to individual guidance

supplements dedicated solely to unauthorized

commitments and raƟficaƟon. For example, the De‐

partment of Commerce guide states that:

The preventaƟve measures herein as well as the 

mulƟ‐level review for all raƟficaƟons of unauthor‐

ized procurement acƟons required by this Chapter 

emphasize the Department’s goal to minimize 

these acƟons. 

AddiƟonally, these guides state that the Government

can only avoid unauthorized commitments through

aƩenƟon to detail and strict adherence to official guid‐

ance by Agency personnel. The SBA has an Adminis‐

traƟve Procedure for the raƟficaƟon process and notes

that the goal of the SBA is to “preclude, to the

maximum extent possible, the need for raƟficaƟon of

acƟons.” However, the procedure only provides

general informaƟon about the raƟficaƟon process and

no guidance to Agency personnel about how to

prevent unauthorized commitments. Detailed guid‐

ance about unauthorized commitments would provide

direcƟon and Ɵe day‐to‐day acƟons and performance

to laws and regulaƟons. This detailed guidance would

provide the Agency greater authority to hold its

employees accountable for their acƟons.

Training

EffecƟve change requires training that promotes and 

develops skills related to the Agency’s performance 

expectaƟons and underlying values and beliefs. 

When the AcquisiƟon Division moved to the DFC, it

developed and updated the contracƟng procedures

and responsibiliƟes of CORs to be used by all Program

Office staff in planning for and managing contracts.

However, according to AcquisiƟon Division staff and

our review of contract files, not all Program Office staff 

properly planned for or managed their contracts.

11 Report Number 13‐14
     

                 

                   

           

             

       

                      

               

                

         

                 

            

           

          

           

         

           

                   

      

                 

            

            

           

           

                 

            

             

               

                 

             

                 

              

                

           

           

               

                

                 

             

   

Specifically, these planning and management issues

were caused by a lack of training and confusion about

acquisiƟon procedures. Importantly, Federal Acquisi‐

Ɵon CerƟficaƟon for CORs dictate that a COR must

remain up‐to‐date with required contract training. By

not tracking required contract deadlines and

submiƫng inadequate AcquisiƟon Packages to the

AcquisiƟon Division, Program Office staff hindered the

ability of the AcquisiƟon Division to award contracts to

meet their needs. Specifically, AcquisiƟon Division

staff indicated that some CORs had issues managing

the Ɵmeframes of a new contract and knowing when

to provide noƟce about using an opƟon year.

AddiƟonally, prior to moving the AcquisiƟon Division

to the DFC, the SBA did not consistently follow applica‐

ble federal laws and regulaƟons when funding

contracts. AŌer the move, the change from previous

pracƟces created confusion among the Program Office

staff based upon our analysis of raƟficaƟon documen‐

taƟon—thus directly impacƟng the ability of the SBA

to acquire products or services efficiently. The SBA

has been providing more training to its Program Office

staff on properly contracƟng for needed products or

services.

However, to fully effect the changes the Agency seeks,

future training provided by the SBA needs to focus on

contract planning. This includes developing contract

requirements and the potenƟal ramificaƟons of poor

contract planning, such as unauthorized commitments

or a gap in services. When a Program Office or a COR

does not effecƟvely plan for its contracts and renew‐

als, either the Agency will not receive consistent

services or unauthorized commitments may occur

again in the future when essenƟal products or services

are required. This poor contract management impairs

the ability of the Agency to provide mission‐related

services and other operaƟonal funcƟons. See Appen‐

dix III for more informaƟon about contract manage‐

ment regulaƟons and best pracƟces.

***

12 Report Number 13‐14
     

   

        

               

           

                   

         

                  

      

         

                      

           

          

               

           

           

               

   

       

                 

                  

     

     

           

                

         

           

     

                    

             

             

               

       

           

           

               

                   

                  

                        

  

           

                

         

                  

     

               

                

                

     

           

              

             

             

             

                 

             

                 

             

              

                  

              

               

                     

                

          

                  

            

           

        

            

                

           

                 

                     

  

         

             

             

   

            

Conclusions and RecommendaƟons
 

Conclusions

The large number of unauthorized commitments, and

the reasons behind these occurrences at the SBA,

indicate a breakdown in contract management pracƟc‐

es. Because the SBA did not effecƟvely perform basic

acquisiƟon funcƟons, these unauthorized commit‐

ments put the Agency’s mission and mission support

acƟviƟes at risk through potenƟal loss of criƟcal

services. While federal regulaƟons provide a means to

raƟfy unauthorized commitments so the Government

can pay for the services received, unauthorized com‐

mitments should be a very rare occurrence. Further‐

more, the raƟficaƟon process has diverted criƟcal re‐

sources from other acquisiƟon acƟviƟes and added

unnecessary cost to the acquisiƟon process.

The SBA has made strides in implemenƟng changes to

improve the acquisiƟon process, but sustaining these

changes over the long term remains in doubt without

transformaƟon of the SBA’s culture which permiƩed

these problems to occur. Moreover, the Agency needs

to ensure that the pracƟces and behavior of its

employees align with Federal law and regulaƟons.

AddiƟonally, SBA managers and execuƟves play a key

role in seƫng the tone in support of the change, and

ensuring that appropriate controls are in place to

prevent management override of the acquisiƟon

process. Managers and execuƟves at each level of the

organizaƟon are responsible for developing an

environment that encourages ethical and effecƟve

acquisiƟon pracƟces. This requires beƩer planning,

guidance, training, and ulƟmately holding people

accountable for their acƟons. UnƟl the Agency takes

acƟon to change the current culture, unauthorized

commitments may occur in the future, and the Agency

will conƟnue to be placed at risk as a result.

RecommendaƟons

We recommend that the SBA Administrator:

1) Determine whether it is appropriate and feasible

to take administraƟve and/or legal acƟons against

SBA employee(s) making unauthorized commit‐

ments in instances where an unauthorized

commitment cannot be raƟfied.

We recommend that the Chief AcquisiƟon Officer in

coordinaƟon with the Senior Procurement ExecuƟve:

1) In the short‐term, issue a Procedural NoƟce

idenƟfying what an unauthorized commitment is

and that under no circumstances should an

unauthorized commitment occur. This Procedural

NoƟce should also state that administraƟve and/

or legal acƟon may be taken against those

employees who commit the Government without

the authority to do so.

2) Update and implement the Agency Standard

OperaƟng Procedures for acquisiƟons to include

the informaƟon provided in the Procedural NoƟce

on unauthorized commitments.

3) Develop a separate acquisiƟon process guide for

SBA staff specific to unauthorized commitments

and the raƟficaƟon process.

4) Update the COR Acceptance LeƩer to include that

SBA staff assigned as a COR will not make an

unauthorized commitment, and will follow guid‐

ance related to unauthorized commitments.

5) Consider opƟons for incorporaƟng compliance

with the COR Acceptance LeƩer and Federal

AcquisiƟon RegulaƟons into the annual perfor‐

mance assessment for those SBA employees cerƟ‐

fied as CORs.

6) Provide annual training to SBA employees

involved in the acquisiƟon process on properly

planning for and managing contracts at the begin‐

ning of the fourth quarter to include addressing

how unauthorized commitments occurred in the

past and how to prevent them.

Management AcƟons Taken and In Process

The SBA updated the raƟficaƟon template and process

as of May 2012 to address concerns raised by the au‐

dit team during this audit. The OIG discussed this raƟ‐

ficaƟon process and concerns in Advisory

Memorandum 12‐22, The SBA’s RaƟficaƟon Process 

Could Lead to Possible AnƟ‐Deficiency Act ViolaƟons.

13 Report Number 13‐14
     

  

              

                                         

           

                           

         

              

       

              

               

            

     

   

                 

                 

                 

               

             

          

                 

                     

       

               

  

             

                 

                 

              

                

             

                 

                

                

            

           

                 

            

               

                   

              

                 

           

                  

           

                   

               

               

           

          

      

                

              

               

              

             

            

             

                  

            

             

               

             

              

            

               

           

         

              

           

       

           

   

         

     

                 

       

                

             

            

             

     

                 

              

Agency Comments and OIG Response
 

On January 24, 2013, we provided a draŌ of this report

to the Agency for official comment with one recom‐

mendaƟon directed to the SBA Administrator and six

recommendaƟons directed to the Chief AcquisiƟon

Officer and the Senior Procurement ExecuƟve. The

SBA Administrator delegated responsibility for

comment to the Office of General Counsel, which

submiƩed official comments on March 13, 2013.

Those comments are included in their enƟrety in Ap‐

pendix VI. The OIG received formal comments from

the Chief Financial Officer—who is the designated

Chief AcquisiƟon Officer—on March 4, 2013. Those

comments are included in their enƟrety in Appendix

VII. According to the Chief Financial Officer, the final

comments submiƩed include comments from the

Senior Procurement ExecuƟve, and for the purposes of

this report serve as evidence of coordinaƟon between

the Chief AcquisiƟon Officer and the Senior Procure‐

ment ExecuƟve (SPE). However, in the audit recom‐

mendaƟon follow‐up process, because the Chief

AcquisiƟon Officer and the SPE are responsible for

acquisiƟon management, the OIG will require signed

SBA Form 1824s, RecommendaƟon AcƟon Sheets, from

both officials to close out our recommendaƟons. We

consider management comments to be responsive to

four recommendaƟons, and non‐responsive to three

recommendaƟons. A summary of management’s

general comments, recommendaƟon‐specific com‐

ments, and our responses follows.

General Management Comments (1)

The Chief Financial Officer (CFO) stated that he shares

the OIG’s concern about unauthorized commitments

and the potenƟal ramificaƟons. The CFO also agreed

that the SBA should take steps to eliminate unauthor‐

ized commitments. Further, the CFO indicated that

uƟlizing Agency staff and other resources to raƟfy

these unauthorized commitments detracted, at Ɵmes,

from the daily operaƟons of the Agency. The CFO

further supports an agency‐wide approach, at all

levels, to improve the culture through improved

accountability, communicaƟon, and guidance.

However, the CFO believes that our recommendaƟons

conflict with our audit conclusions because we only

directed responsibility for responding to the Chief

AcquisiƟon Officer and SPE.

OIG Response

The Chief AcquisiƟon Officer and SPE are the key driv‐

ers of acquisiƟon policy within an agency and must

work together to ensure the Agency: (1) buys smarter;

(2) strengthens its acquisiƟon workforce; (3) builds the

right supplier relaƟonships; and (4) advances mission

performance.3 Furthermore, based on our conclu‐

sions, the Chief AcquisiƟon Officer and the SPE, along

with the CFO, are in the best posiƟon to prevent, to

the maximum extent possible, unauthorized commit‐

ments from occurring given their duƟes required by

their designaƟon.

The SBA Administrator’s designaƟon leƩer for the

Chief AcquisiƟon Officer at the SBA states that his offi‐

cial duƟes are outlined in 41 U.S.C. 414(b)—now 41

U.S.C 1702(b). The duƟes of the Chief AcquisiƟon

Officer help to ensure that the acquisiƟon process

operates in compliance with all federal acquisiƟon

laws and regulaƟons in order to safeguard the interest

of the Government. Guidance from the Office of Man‐

agement and Budget (OMB) states that the Chief

AcquisiƟon Officer should ensure that acquisiƟon

issues receive high‐level management aƩenƟon to

produce the best possible outcome and value for the

taxpayer.4 AddiƟonally, the OMB guidance provides

that Chief AcquisiƟon Officers should work closely with

the SPEs in order to have the biggest impact on acqui‐

siƟon management at a federal agency. Having an

effecƟve SPE is an important factor in developing an

efficient, effecƟve, and accountable agency acquisiƟon

funcƟon. In accordance with 41 U.S.C. § 1702(c),5 the

Senior Procurement ExecuƟves are responsible for the

3 Memorandum for Chief AcquisiƟon Officers and Senior Procurement ExecuƟves: Clarifying Chief AcquisiƟon Officer Roles and ResponsibiliƟes.
 

Office of Federal Procurement Policy. October 18, 2012.
 4 The Services AcquisiƟon Reform Act of 2003 established the posiƟon of the Chief AcquisiƟon Officer to ensure that acquisiƟon issues receive
 

high‐level management aƩenƟon. 41 U.S.C. SecƟon 414.
 5 41 U.S.C. SecƟon 1702(c) and 41 U.S.C. SecƟon 414(c) – Senior Procurement ExecuƟve.
 

14 Report Number 13‐14
     

     

               

                 

                  

                 

             

  

   

                 

               

              

          

             

         

           

          

                 

              

           

   

                  

               

                

               

                

             

               

         

        

               

                 

             

              

         

                   

      

     

                

           

            

       

           

             

               

         

               

             

             

               

         

             

                 

                 

            

               

            

                  

                

         

                 

              

               

               

        

                 

               

           

                 

            

             

                

           

             

         

                

               

               

                    

             

             

     

management direcƟon of the agency’s acquisiƟon

system, including implementaƟon of agency‐specific

acquisiƟon policies. Specifically, the SPE’s role

includes the development of the acquisiƟon SOP,

which is the subject of several of our recommenda‐

Ɵons. Moreover, to perform effecƟve acquisiƟon man‐

agement, the Chief AcquisiƟon Officer must also work

closely with others (government‐wide and within their

agencies), including the Chief InformaƟon Officer, the

Chief Human Capital Officer, and program and project

managers to conƟnuously improve the federal acquisi‐

Ɵon system.

Furthermore, based upon OMB guidance and their

roles and duƟes, the Chief AcquisiƟon Officer and SPE

are the key officials that drive acquisiƟon policy within

an agency. Specifically, the Chief AcquisiƟon Officer

should coordinate with the SPE to monitor the perfor‐

mance of acquisiƟon acƟviƟes and acquisiƟon

programs at the SBA. To do this, the Chief AcquisiƟon

Officer and the SPE should coordinate with other

senior management officials and program office offi‐

cials to ensure that the Agency complies with all acqui‐

siƟon laws and regulaƟons. AddiƟonally, the Chief

AcquisiƟon Officer and the SPE should work together

to evaluate the performance of those programs based

on the applicable performance measurements. The

Chief AcquisiƟon Officer and the SPE must also advise

and assist the SBA Administrator and other Agency

officials to ensure that effecƟve acquisiƟon manage‐

ment helps achieve the SBA’s mission and address any

performance issues. Further, within their duƟes, the

Chief AcquisiƟon Officer and SPEs have the responsibil‐

ity to address the large number of unauthorized

commitments, monitor and improve the acquisiƟon

process at the SBA, and advise the SBA Administrator

on appropriate strategies to prevent unauthorized

commitments. As a result, we stand by our conclu‐

sions and direct responsibility for six of our recom‐

mendaƟons to the Chief AcquisiƟon Officer and the

SPE. For more clarificaƟon on the role of the Chief

AcquisiƟon Officer and the SPE in implemenƟng our

recommendaƟons, please see the OIG’s response to

each management comment below.

General Management Comments (2)

The CFO stated that the OIG report suggests responsi‐

bility and acƟons of the AcquisiƟon Division, which fall

beyond the scope of that Division. The CFO specifically

menƟons the areas of ethical conduct training for all

employees and taking personnel acƟons against those

employee(s) making unauthorized commitments.

OIG Response

The OIG does not contest that the responsibiliƟes and

acƟons of the AcquisiƟon Division do not encompass

ethics training and disciplinary acƟon for those

employee(s) who made an unauthorized commitment.

We addressed our recommendaƟon involving the SBA

taking personnel acƟon resulƟng when an unauthor‐

ized commitment occurs directly to the SBA Adminis‐

trator. This recommendaƟon directs the SBA Adminis‐

trator to determine whether it is appropriate to take

administraƟve and /or legal acƟon against SBA

employee(s) when those employee(s) execute an un‐

authorized commitment.

We did not make a recommendaƟon to the Chief

AcquisiƟon Officer and the SPE about providing ethical

conduct training, nor menƟon in the report that

ethical conduct training should be the responsibility of

the AcquisiƟon Division. Our report does menƟon that

making an unauthorized commitment is a violaƟon of

ethics standards; however, our report also states that

making an unauthorized commitment violates federal

acquisiƟon regulaƟons and policy. Our recommenda‐

Ɵon related to training directs the Chief AcquisiƟon

Officer and the SPE to provide training on the acquisi‐

Ɵon process and properly planning for and managing

contracts. Furthermore, the CFO agreed with our

training recommendaƟon and stated that acquisiƟon

training will be provided to the enƟre Agency, and not

just acquisiƟon personnel.

General Management Comments (3)

The CFO indicated that the draŌ report failed to

address whether any negaƟve acƟons were taken

15 Report Number 13‐14
     

       

  

           

                

         

           

         

           

                 

             

       

   

                   

           

           

                 

                

                   

   

  

       

                

                 

                   

          

                    

                 

               

               

                 

             

   

   

               

               

             

              

                

             

             

         

             

             

         

                     

         

               

             

             

            

          

         

       

   

             

               

                 

             

           

             

          

against any SBA employee who made an unauthorized

commitment.

OIG Response

We disagree with the asserƟon that the draŌ report

failed to address whether negaƟve acƟons were taken

against any SBA employee who made an unauthorized

commitment. Specifically, on page 9 of our draŌ 

report—also page 10 of our final report—we stated:

...However, our review indicates that the SBA

has not taken acƟon against any SBA employee who improperly commiƩed the Government.

While the OIG draŌ report acknowledges that the SBA

has taken some steps toward improving the acquisi‐

Ɵon process at the SBA, unauthorized commitments

have conƟnued to occur at the SBA. Due to the

conƟnuance of unauthorized commitments, the OIG

believes that significant changes are sƟll needed to

improve the acquisiƟon process and prevent future

unauthorized commitments.

OIG RECOMMENDATION TO THE 

SBA ADMINISTRATOR 

RecommendaƟon 1 – Determine whether it is appro‐

priate and feasible to take administraƟve and/or

legal acƟons against SBA employee(s) making

unauthorized commitments in instances where an

unauthorized commitment cannot be raƟfied.

Management Comments

The SBA Administrator delegated responsibility of this

recommendaƟon to the Office of General Counsel. The

Office of General Counsel stated that it agreed with

our recommendaƟon and will determine whether it is

appropriate, feasible, and legal to take administraƟve

and/or legal acƟon against SBA employee(s) making

unauthorized commitments in instance where an

unauthorized commitment cannot be raƟfied.

OIG Response

We consider management’s comments responsive to

the recommendaƟon.

OIG RECOMMENDATIONS TO THE CHIEF 

ACQUISITON OFFICER IN COORDINATION 

WITH THE SENIOR PROCUREMENT EXECUTIVE 

RecommendaƟon 1 – In the short‐term, issue a

Procedural NoƟce idenƟfying what an unauthorized

commitment is and that under no circumstances

should an unauthorized commitment occur. This

Procedural NoƟce should also state that administra‐

Ɵve and/or legal acƟon may be taken against those

employees who commit the Government without the

authority to do so.

Management Comments

The CFO stated that the Office of the Chief Financial

Officer (OCFO) circulated an updated acquisiƟon

Standard OperaƟng Procedures (SOP) for comment,

and will include the expanded language in the final

SOP. The CFO believes that the updated SOP negates

the need for a Procedural NoƟce and is responsive to

RecommendaƟon 2.

OIG Response

We consider management’s comments non‐responsive

to the recommendaƟon. The OIG supports the SBA’s

efforts to update its current acquisiƟon SOP, but as

indicated in our report, the SBA has not updated its

acquisiƟon SOP in 28 years—since 1985. AddiƟonally,

the SBA iniƟated its effort to update the SOP in

July 2007 and, more recently, on February 5, 2013,

submiƩed the SOP for the internal clearance process

for comment. This process could take a long Ɵme

before the SOP is issued in final. Further,

16 Report Number 13‐14
     

             

           

               

   

   

                 

               

            

              

                   

           

               

  

           

           

               

                

                 

                  

              

               

                 

                 

           

              

           

            

               

                   

       

         

           

         

   

         

             

              

          

                   

         

               

               

                   

               

         

                 

              

  

                   

                  

               

     

           

       

                 

        

   

           

                   

                

           

             

              

                 

                   

                

                 

                 

               

           

            

             

           

            

           

           

                 

           

unauthorized commitments have conƟnued to occur

since we completed our audit fieldwork. In our

opinion, the Agency could have been proacƟve by issu‐

ing a Procedural NoƟce at any point in Ɵme aŌer the

Agency became aware of the significance of having

417 unauthorized commitments. During the course of

this audit, the OIG noƟfied the Agency of the magni‐

tude and significance of this issue numerous

occasions:

(1)	 Our site visit to the Denver Finance Center in

May 2012;

(2)	 Our exit meeƟng with the Agency for our

audit on the SBA’s RaƟficaƟon Process in Au

gust 2012;

(3)	 The issuance of OIG Advisory Memorandum

12‐22, The SBA’s RaƟficaƟon Process Could 

Lead to Possible AnƟ‐Deficiency Act ViolaƟons 

in September 2012; and

(4)	 Our exit meeƟng with the Agency on this au‐

dit of its unauthorized commitments in

November 2012.

Unauthorized commitments conƟnue to occur, and it

is likely that the SOP will remain in draŌ for some

Ɵme. Therefore, the Agency needs to take immediate

acƟon to signify that unauthorized commitments are

improper and should not be occurring—regardless of

the circumstances. Issuing a Procedural NoƟce in the

interim is a simple and efficient way to raise aware‐

ness of the issue within the Agency unƟl the draŌ SOP

has been finalized. Therefore, we stand by our recom‐

mendaƟon to issue a Procedural NoƟce in the interim.

Further, the duƟes of the Chief AcquisiƟon Officer and

SPE outlined in their designaƟon leƩer provide them

with responsibility for managing the direcƟon of acqui‐

siƟon policy for the execuƟve agency. This responsibil‐

ity includes implementaƟon of the unique acquisiƟon

policies, regulaƟons, and standards of the execuƟve

agency. Within this authority, the OIG appropriately

addressed the recommendaƟon to develop a Proce‐

dural NoƟce for unauthorized commitments to the

Chief AcquisiƟon Officer and the SPE, and not the

OCFO, as discussed in management’s comments.

RecommendaƟon 2 – Update and implement the

Agency standard operaƟng procedures for acquisiƟon

to include the informaƟon provided in the Procedural

NoƟce on unauthorized commitments.

Management Comments

As discussed in its response to RecommendaƟon 1 to

the Chief AcquisiƟon Officer and the SPE, the OCFO

has circulated an updated acquisiƟon SOP for

comment. The OCFO plans to incorporate the expand‐

ed language into the final SOP, as discussed above in

Management Comments to RecommendaƟon 1 made

to the Chief AcquisiƟon Officer and the SPE.

OIG Response

We consider management’s comments responsive to

the recommendaƟon, and the OIG encourages the SBA

to finalize the draŌ acquisiƟon SOP as soon as possi‐

ble. Further, during the comment process, the SBA

needs to ensure that the Chief AcquisiƟon Officer and

the SPE are the key drivers of the SOP update

consistent with the requirements in their duƟes. The

draŌ SOP indicates that the OCFO will issue and main‐

tain the SOP and make any necessary revisions.

However, as discussed above, the roles of the Chief

AcquisiƟon Officer and the SPE include responsibility

for updaƟng the acquisiƟon SOP. Within this authori‐

ty, the OIG appropriately addressed the recommenda‐

Ɵon to include informaƟon about unauthorized

commitments in the updated SOP to the Chief Acquisi‐

Ɵon Officer and the SPE instead of the OCFO, as dis‐

cussed in management’s comments.

RecommendaƟon 3 – Develop a separate acquisiƟon

process guide for SBA staff specific to unauthorized

commitments and the raƟficaƟon process.

Management Comments

The CFO disagreed that an unauthorized commitment‐

specific guidance document for distribuƟon to SBA

employees will result in achieving the needed

improvements in outreach and communicaƟon. The

CFO further stated that the OCFO will examine how it

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can assist in an agency‐wide approach to eliminate

unauthorized commitments.

OIG Response

We consider management’s comments non‐

responsive to the recommendaƟon. Management’s

proposed alternaƟve acƟon does not contain sufficient

detail to determine whether it meets the intent of our

recommendaƟon.

Given the magnitude of unauthorized commitments

that occurred, and that are sƟll occurring at the SBA,

we believe that the SBA needs to emphasize the

prevenƟon of unauthorized commitments through an

individual document. While the OIG appreciates the

involvement of the OCFO, the comments do not

provide any explanaƟon about how the Chief Acquisi‐

Ɵon Officer and the SPE plan to implement our recom‐

mendaƟons. Further, the duƟes of the Chief Acquisi‐

Ɵon Officer and the SPE provide them with the respon‐

sibility to implement agency‐specific acquisiƟon poli‐

cies, regulaƟons, and standards of the execuƟve

agency. AddiƟonally, it requires the Chief AcquisiƟon

Officer and the SPE to develop strategies for training

and professional development to recƟfy a deficiency in

the acquisiƟon process.

The development of unauthorized commitment‐

specific guidance draws aƩenƟon to a specific defi‐

ciency in the acquisiƟon process at the SBA. It also

provides a quick reference for all SBA employees as to

how to avoid making unauthorized commitments,

instead of requiring employees to search for the infor‐

maƟon in a draŌ SOP that is currently 109 pages in

length. Further, the OIG recognizes that other federal

agencies have included guidance about unauthorized

commitments in their acquisiƟon manual. However,

the SBA had over 400 unauthorized commitments and

conƟnues to incur unauthorized commitments, which

consƟtutes a serious problem that the Agency needs

to address as a priority. To put the number of

occurrences in perspecƟve, as listed in our report,

similar sized agencies incurred far fewer unauthorized

commitments than the SBA. Moreover, the U.S. Postal

Service—with a much larger contracƟng budget of

$12.3 billion in FY 2011—incurred 78 unauthorized

commitments over a two‐year period.

RecommendaƟon 4 – Update the COR Acceptance

LeƩer to include that SBA staff assigned as a COR will

not make an unauthorized commitment, and will fol‐

low guidance related to unauthorized commitments.

Management Comments

The CFO stated that the COR Acceptance LeƩer

addresses what a COR is allowed to do, and does not

encompass all instances of what a COR cannot do or

should not do. The CFO addiƟonally stated that the

COR Acceptance LeƩer is not the most appropriate

place for this type of informaƟon. The CFO acknowl‐

edges that it will work with the OIG to address this

concern.

OIG Response

We consider management’s comments non‐responsive

to the recommendaƟon. According to their duƟes, the

Chief AcquisiƟon Officer, in coordinaƟon with the SPE,

need to make acquisiƟon decisions that establish clear

lines of authority, accountability, and responsibility

that are aligned with all applicable laws and regula‐

Ɵons. AddiƟonally, as indicated in our report, the SBA

should make eliminaƟng unauthorized commitments

an Agency priority. Further, the Chief AcquisiƟon

Officer should assess the adequacy of requirements

that facilitate the achievement of performance goals

established for acquisiƟon management within an

execuƟve agency.

Federal AcquisiƟon RegulaƟons Subpart 1.602‐2(d)(6)6

outlines that within a COR Acceptance LeƩer, the

agency should idenƟfy the limitaƟons of the COR’s

authority and state that the COR may be personally

liable for unauthorized acts. While the CFO believes

that the COR Acceptance LeƩer is not the appropriate

place for the informaƟon outlined in our recommen‐

daƟon, the FAR shows that the leƩer should outline

what a COR cannot do and that a COR can be held

6 FAR Subpart 1.602‐2(d)(6) ‐ ResponsibiliƟes.

18 Report Number 13‐14
     

            

       

           

             

             

           

     

   

           

                 

         

           

           

            

             

           

  

           

       

                 

             

          

                 

         

               

              

               

             

            

               

             

         

           

             

          

           

                

                 

         

                

         

          

         

                

        

         

          

                 

                        

                   

       

         

           

               

                 

              

                   

           

       

                  

          

                  

 

 

              

             

               

               

               

             

liable for unauthorized acts. These unauthorized acts

referenced in the FAR include unauthorized commit‐

ments. Moreover, because the SBA incurred over 400

unauthorized commitments, the Agency should

specifically address unauthorized commitments in the

COR Acceptance leƩer. In addiƟon, the exisƟng COR

Acceptance LeƩer outlines 26 acƟons that a COR can

do, and 14 acƟons that a COR cannot do. Six of those

fourteen acƟons that a COR cannot do would result in

an unauthorized commitment; however, these acƟons

are not directly linked to unauthorized commitments

as currently described in the Acceptance LeƩer.

AddiƟonally, on page 46 of its draŌ acquisiƟon SOP,

the SBA outlines procedures for noƟfying a COR when

(s)he has exceeded his/her authority. By specifically

staƟng in the Acceptance LeƩer that a COR may not

make an unauthorized commitment and must follow

all agency guidance involving unauthorized commit‐

ments, the Agency can hold a COR responsible for

violaƟng his/her COR Acceptance LeƩer. Specifically,

the draŌ SOP states that when a COR exceeds his/her

authority:

The CO will prepare a leƩer to the COR poinƟng 

out the improper acƟon and reminding the COR of 

the limitaƟons of his/her authority under the COR 

appointment. It [the SBA] will specifically reserve 

the right of the Government to take further acƟon 

against the individual for his/her improper acts. 

The leƩer will be forwarded to the COR through 

his/her department director and supervisor. 

Depending upon the nature of the abuse, the CO 

has the authority to revoke the COR appointment 

immediately. The CO may also take other acƟons 

required by law or regulaƟon such as, when 

appropriate, referring the acƟon to other 

invesƟgaƟve authoriƟes. 

When finalized, the acquisiƟon SOP along with

incorporaƟon of the recommended language into the

COR Acceptance LeƩer will help safeguard the SBA

against any unauthorized or illegal acƟons taken by

the COR that may have resulted in an unauthorized

commitments. This also allows for appropriate acƟon

to be taken when an unauthorized commitment

cannot be raƟfied.

RecommendaƟon 5 – Consider opƟons for incorpo‐

raƟng compliance with the COR Acceptance LeƩer

and Federal AcquisiƟon RegulaƟons into the annual

performance assessment for those SBA employees

cerƟfied as CORs.

Management Comments

The CFO stated that while the performance manage‐

ment plans are outside of the scope of the AcquisiƟon

Division’s authority, the Agency’s new performance

management system, the Talent Management Center,

includes a performance element that Ɵes COR respon‐

sibiliƟes to an individual’s annual performance plan.

This new performance requirement went into effect at

the beginning of fiscal year 2013.

OIG Response

We consider management’s comments responsive to

the recommendaƟon; however, the OIG recommenda‐

Ɵon was directed to the Chief AcquisiƟon Officer and

the SPE, and not the AcquisiƟon Division—as men‐

Ɵoned in Management Comments. The Chief Acquisi‐

Ɵon Officer and SPE are responsible for ensuring all

performance requirements for the acquisiƟon process

at the Agency comply with applicable laws and regula‐

Ɵons. AddiƟonally, the Chief AcquisiƟon Officer and

SPE ensure that the Agency incorporates all policies

and procedures released by the OMB involving the

implementaƟon of acquisiƟon policy. The OMB’s

Office of Federal Procurement Policy (OFPP) issued a

Revision to the Federal AcquisiƟon CerƟficaƟon for

ContracƟng Officer’s RepresentaƟves (FAC‐COR) in

September 2011 that recommends that agencies add

COR responsibiliƟes as a criƟcal element in their per‐

formance plans. In moving forward with incorporaƟng

COR performance elements into an individual’s annual

performance plan, the OIG encourages the SBA to

ensure all CORs assigned to an acƟve contract within

the performance period have the COR performance

elements in their plan. Moreover, as directed by

OFPP, the COR’s performance management process

19 Report Number 13‐14
     

             

             

             

           

   

             

           

         

                  

               

             

               

           

               

                   

           

   

                 

         

           

             

            

               

             

           

           

               

             

               

               

         

         

   

                   

              

                

               

       

                  

                

               

               

               

         

  

           

            

                 

             

             

           

              

           

                 

              

       

            

               

should allow for input by the ContracƟng Officer into

the COR’s performance appraisal. Further, OFPP

recommends that agencies incorporate oversight of

COR responsibiliƟes as a performance standard for all

COR supervisors. The Chief AcquisiƟon Officer should

also coordinate with the Chief Human Capital Officer

and other appropriate officials to ensure the SBA inte‐

grates COR performance elements into the perfor‐

mance plans for all acƟve CORs.

RecommendaƟon 6 – Provide annual training to SBA

employees involved in the acquisiƟon process on

properly planning for and managing contracts at the

beginning of the fourth quarter to include addressing

how unauthorized commitments occurred in the past

and how to prevent them.

Management Comments

The CFO stated that the Agency will include the topics

menƟoned in RecommendaƟon 6 in the ongoing

training conducted at the SBA. AddiƟonally, the OCFO

believes that this training needs to encompass an

agency‐wide approach to addressing unauthorized

commitments. The CFO also believes it would be more

effecƟve to have this training provided at an

employee’s on‐boarding, or in a means similar to other

required annual employee training (e.g. IT security or

“CSAT”), which is provided to employees through a

training module taken via computer.

OIG Response

We consider management’s comments responsive to

the recommendaƟon. Based on OMB guidance, the

Chief AcquisiƟon Officer and the SPE should focus on

building a well‐trained acquisiƟon workforce that can

properly define requirements, build the right supplier

base, select the best soluƟons for contract awards,

and effecƟvely manage these acquisiƟons. While the

OIG recommended that those involved in the acquisi‐

Ɵon process receive the training, we fully support any

effort to provide annual agency‐wide training on

contract authority that also addresses unauthorized

commitments and how to prevent them. AddiƟonally,

to help support agency‐wide training efforts, the Chief

AcquisiƟon Officer should work with the Agency’s

Chief Human Capital Officer, the Chief InformaƟon

Officer, and principle program managers in the devel‐

opment and implementaƟon of the training.

AcƟons Required

Please provide your management decision for each
 

recommendaƟon on the aƩached SBA Form 1824s,
 

RecommendaƟon AcƟon Sheets, within 30 days from
 

the date of this report. Your decision should idenƟfy
 

the specific acƟon(s) taken or planned for each recom‐

mendaƟon and the target date(s) for compleƟon.
 

We appreciate the courtesies and cooperaƟon of the
 

Small Business AdministraƟon during this audit.
 

If you have any quesƟons concerning this report,
 

please call me at (202) 205‐7390 or Riccardo R. Buglisi,
 

Director, Business Development Programs Group at
 

(202) 205‐7489.

***

20 Report Number 13‐14
     

      

             

             

              

             

         

                 

         

             

           

             

                

             

                   

             

           

                   

           

          

            

                 

           

   

               

         

              

                 

             

                  

               

               

       

                 

               

            

                  

             

           

               

              

             

   

                   

              

          

                

         

                    

                 

          

              

              

              

             

       

            

                 

               

               

           

               

          

           

              

           

           

           

               

             

           

                   

       

                   

            

       

                 

                  

                 

                 

        

               

            

     

                

               

           

      

Appendix I: Scope and Methodology
 

The OIG conducted this audit in response to a hotline

complaint received regarding the large number of

unauthorized commitments occurring at the SBA. Our

audit objecƟve was to determine the extent and

reasons for unauthorized commitments incurred by

the SBA as of May 2012. To meet our audit objecƟves,

auditors conducted a site visit to the Denver Finance

Center where we obtained documentaƟon from

procurement and raƟficaƟon officials. During this site

visit, we interviewed 13 contracƟng officers and

contract specialists as well as AcquisiƟon Division

managers to learn about their background, agency

acquisiƟon planning, unauthorized commitments, and

their coordinaƟon with program officials. The audit

team also conducted interviews with the Office of the

Chief Financial Officer, the Office of General Counsel,

and the Office of Management and AdministraƟon.

AddiƟonally, the audit team reviewed applicable pub‐

lic laws and Federal AcquisiƟon RegulaƟons related to

unauthorized commitments and raƟficaƟon. We also

reviewed internal agency policy and guidance includ‐

ing the SBA Standard OperaƟng Procedures for

AcquisiƟon, guidance available on the SBA AcquisiƟon

intranet website, available trainings for acquisiƟon

staff, and standards of ethical conduct.

The audit team reviewed data from the AcquisiƟon

Division showing the SBA received invoices associated

with at least 417 unauthorized commitments valuing

at more than $1.4 million. For our audit, we selected

unauthorized commitments for further review based

upon the total value of the invoices and total number

of invoices associated with each vendor. AddiƟonally,

the audit team selected unauthorized commitments

that were in various stages in the raƟficaƟon process

to help depict the process from start to finish. The

sample universe of this audit included a total of eleven

vendors with a total value of $1,017,713.36 across 198

unauthorized commitments. More specifically the

audit team reviewed 55 raƟfied invoices from three

vendors valuing $490,572.01 and assessed 143

unauthorized commitments valued at $490,570.01

that had not been raƟfied. AddiƟonally, the audit

team included one example in our universe idenƟfied

by the AcquisiƟon Division where an unauthorized

commitment almost occurred.

The audit team reviewed and assessed each unauthor‐

ized commitment and raƟficaƟon package in our scope

to determine the reasons why the unauthorized

commitments occurred. Within the review of the

contract, if applicable, and raƟficaƟon documentaƟon,

we analyzed and compared the reasons stated by the

employees, who acted as ContracƟng Officers Repre‐

sentaƟves, and the vendors on why the unauthorized

commit occurred. AddiƟonally, we reviewed the

selected raƟficaƟon packages to determine if the raƟ‐

ficaƟon met all federal regulaƟons and agency policies.

The audit team further reviewed policies and regula‐

Ɵons applicable to all federal agencies and the SBA to

idenƟfy best pracƟces for contract management to

evaluate the current contract management pracƟces

used by the SBA. To idenƟfy these best pracƟces the

audit team reviewed SBA Standard OperaƟng Proce‐

dures, guidance developed by the SBA AcquisiƟon

Division, the Federal AcquisiƟon RegulaƟons, and

guidance and policies issued by the Office of Federal

Procurement Policy within the Office of Management

and Budget.

We conducted our audit in accordance with generally

accepted government audiƟng standards from Decem‐

ber 2011 to November 2012. Those standards require

that we plan and perform the audit to obtain suffi‐

cient, appropriate evidence to provide a reasonable

basis on our audit objecƟves. We believe that the

evidence obtained provides a reasonable basis for our

findings and conclusions based on our audit objecƟve.

Review of Internal Controls

Earlier in this audit, we idenƟfied a significant internal

control weakness in the SBA’s raƟficaƟon process of

unauthorized commitments. We reported this issue in

Advisory Memorandum 12‐22, The SBA’s RaƟficaƟon 

Process Could Lead to Possible AnƟ‐Deficiency Act 

ViolaƟons. We found that the process the SBA used

did not comply with Federal AcquisiƟon RegulaƟons

(FAR) raƟficaƟon requirements. Following our noƟfi‐

caƟon, the AcquisiƟon Division updated its process to

ensure compliance with the FAR. The updated raƟfica‐

Ɵon process was not evaluated within the scope of

this audit.

21 Report Number 13‐14
     

                

                

                 

               

       

             

   

                

             

           

             

             

       

                 

      

       

                  

                   

           

            

              

           

         

     

                 

           

                 

               

      

              

           

         

            

        

           

                   

              

           

               

                

               

                 

           

                 

             

     

       

                   

            

             

           

             

             

               

                 

                  

                 

                   

                

             

   

                

          

             

           

         

            

                     

AddiƟonally, we reviewed the available internal

guidance related to unauthorized commitments. Each

ContracƟng Officers RepresentaƟve (COR) is required

to sign an Acceptance LeƩer to acknowledge his or her

role in monitoring each contract. However, the infor‐

maƟon in the leƩer related to unauthorized commit‐

ments was not sufficient to prevent violaƟon of feder‐

al policies and procedures. More controls are needed

to ensure that the COR does not violate standards

agreed to with the signing of the Acceptance LeƩer.

Nature of Limited or OmiƩed InformaƟon

We did not omit informaƟon due to confidenƟality or

sensiƟvity, nor were there limitaƟons to informaƟon

on this audit.

Use of Computer Processed Data

We relied on the data prepared by the Denver Finance

Center (DFC) AcquisiƟon Division and computer

processed data from the Federal Procurement Data

System ‐ Next GeneraƟon (FPDS‐NG) to access general

contract informaƟon for our review. The data

obtained from the AcquisiƟon Division was accurate

and complete, and supported the objecƟves of this

audit Therefore, this data is sufficiently reliable for

the purposes of our review. The FPDS‐NG data was

used to conduct background research and is not the

sole support for the audit findings; therefore, it is also

sufficiently reliable for the purposes of our review.

Prior Coverage

The Office of the Inspector General issued Advisory

Memorandum Number 12‐22, The SBA’s RaƟficaƟon 

Process Could Lead to Possible AnƟ‐Deficiency Act 

ViolaƟons, on September 28, 2012. We reported that

the SBA had raƟfied unauthorized commitments

associated with an expired postage meters contract

without determining whether unobligated funds were

available when the unauthorized commitment iniƟally

occurred. Without such a determinaƟon, the raƟfica‐

Ɵons may put the SBA at risk for an AnƟ‐Deficiency Act

violaƟon. The OIG did not determine how widespread

the deficiency was, but wanted to provide SBA

management with early noƟficaƟon of the issue so the

SBA could take correcƟve acƟon, if needed.

AddiƟonally, AcquisiƟon Management was added as a

challenge in the annual OIG Management Challenge

report, Report on the Most Serious Management and 

Performance Challenges Facing the Small Business 

AdministraƟon in Fiscal Year 2013, Report Number 13‐

02. The SBA AcquisiƟon Program and its processes

was added because remaining challenges include, (1)

poorly defined requirements, (2) internal control defi‐

ciencies, (3) improper funding of contracts, (4) inade‐

quate oversight, and (5) outdated and incomplete

SOPs related to acquisiƟon.

The U.S. Postal Service, Office of the Inspector General

published Report Number CA‐AR‐12‐004,

Unauthorized Contractual Commitments on August 6,

2012. This audit report found that during fiscal years

(FYs) 2010 and 2011, the Postal Service had a total

universe of 78 unauthorized commitments, valued at

$1.8 million. Of the selected unauthorized contractual

commitments, the OIG founds that Postal Service

personnel did not always raƟfy those unauthorized

contractual commitments in accordance with internal

policy. AddiƟonally, unauthorized contractual

commitments pose a risk to the Postal Service when

personnel do not follow normal purchasing proce‐

dures, as these purchases do not include the terms

and condiƟons necessary to protect the interests of

the Postal Service. In addiƟon, unauthorized contrac‐

tual commitments may not be an appropriate or

advantageous business arrangement for the Postal

Service and warrant management aƩenƟon.

22 Report Number 13‐14
     

   

   

                      

                              

                              

                                      

                   

                   

                            

                          

                               

             

                           

                             

                        

                                    

                                     

                   

                       

          

                                 

  

                              

                                      

                              

                           

                            

                                

                                     

                                

                                  

                                 

                

     

           

Appendix II: Unauthorized Commitments—

Frequently Asked QuesƟons

An unauthorized commitment should not occur in a Federal Agency. Unauthorized commitments indicate a

breakdown in contract management. The Federal Government and the SBA are placed at risk when unauthorized

commitments occur. This risk occurs because the ContracƟng Officer (CO) has not made the same assurances

that the necessary terms and condiƟons are in place to protect the interests of the SBA. AddiƟonally, the CO has

not assured that funds are available for the commitment.

Below are Frequently Asked QuesƟons defining an unauthorized commitment, ways to avoid making an unauthor‐

ized commitment, and what to do if an unauthorized commitment occurs. This list of quesƟons is not compre‐

hensive and the following informaƟon will not guarantee the prevenƟon of an unauthorized commitment. All

SBA employees have a duty to comply with federal laws and safeguard the agency and its commitments appropri‐

ately.

What is an unauthorized commitment?

Federal AcquisiƟon RegulaƟons (FAR) Subpart 1.602‐3—RaƟficaƟon of unauthorized commitments, defines an

unauthorized commitment as an agreement between a vendor and a government representaƟve that is not bind‐

ing solely because the Government representaƟve who made the commitment lacked the authority to enter into

that agreement. The only Government representaƟve with the authority to bind the Government is a cerƟfied

ContracƟng Officer, and only to the extent of his or her delegated authority. Furthermore, the FAR also states

that no government contract should be made with a vendor unless the CO ensures that all laws, execuƟve orders,

regulaƟons, and all other applicable procedures have been met.

AddiƟonally, during the process of idenƟfying unauthorized commitments and compleƟng raƟficaƟon, the SBA

AcquisiƟon Division staff defines an unauthorized commitment as:

1) Any invoice that is received where an unauthorized program official approved the purchase of a product

or service;

2) Any invoice that is not associated with an acƟve contract—usually an expired contract; or

3) Any invoice that is for a good and/or service outside of the scope of work for acƟve contracts.

What does an unauthorized commitment look like?

The following examples are unauthorized commitments that occurred at the SBA. The examples are meant to

provide possible indicators of what an unauthorized commitment looks like and how they can occur.

Example 1: Blackberry Services 

Blackberry service is essenƟal to the Agency’s regular operaƟons. However, the Agency almost lost Blackberry

service three Ɵmes in a nine month period. In this situaƟon, the contracƟng officer’s representaƟve (COR) did

not plan for and complete a new requisiƟon or submit the needed funding in Ɵme to award a new contract be‐

fore the original period of performance expired. The previous contract for Blackberry services expired at the end

of September 2011 yet the SBA conƟnued to receive the Blackberry services. By conƟnuing to receive the Black‐

berry services without a valid contract in place between October 2011 and December 2011, the SBA incurred

$145,201.40 in services through unauthorized commitments. AŌer unauthorized commitment occurring for

23 Report Number 13‐14
     

                                       

                                

                            

                                       

                            

                             

                                 

                                      

           

                                       

                           

                                  

                            

                            

                               

                             

                               

                               

                                   

                       

                               

                                 

                                          

                                

                               

                          

                             

                                         

                                     

               

                                 

                                      

                                            

                 

  

                    

         

three months, the COR and Program Office sƟll did not provide a new requisiƟon and adequate funding to cover a

12‐month contract for Blackberry services. Therefore, the SBA could only award a two‐month bridge contract for

Blackberry services from January 5, 2012 through March 4, 2012, to prevent more unauthorized commitments.

When the bridge contract was on the verge of expiring, the COR and Program Office sƟll had not provided the

required requisiƟon paperwork and funding. To prevent a disrupƟon in services without incurring more unau‐

thorized commitments, the SBA awarded a leƩer contract, which is used in limited circumstances because they

do not provide the same protecƟons to the Government or ensure the Government receives the best price availa‐

ble. BeƩer planning for the required services in advance could have prevented the use of a leƩer contract and

the potenƟal disrupƟon of essenƟal Agency services.

Example 2: Copier Services 

The use of copiers and printers is required for normal business operaƟons, and if a valid contract is not awarded

to conƟnue the services once the previous contract expires, unauthorized commitments will occur or the essen‐

Ɵal service will be suspended. A large number of the unauthorized commitments occurring in the last two fiscal

years were related to copier and scanner services. The Agency had 177 unauthorized commitments involving

seven vendors for copiers with a total value of $341,046.23. The unauthorized commitments for copier services

occurred because the CORs did not monitor and manage their contracts, and allowed the period of performance

to expire. Further, the Agency conƟnued to receive services without a valid contract in place. Consequently,

some vendors stopped providing copier services due to non‐payment by the Agency, which then resulted in nu‐

merous broken copiers. Had the CORs properly planned for and managed the contract’s period of performance

for copier services, the vendors would have been bound by a new contract to provide these essenƟal services.

Example 3: Postage Meters 

Several Field Offices lost postage meter services due to recurring unauthorized commitments and non‐payment

by the SBA. These unauthorized commitments occurred because the COR did not plan for a new contract. The

poor planning included not providing full funding to cover the required period of performance and not submiƫng

a new requisiƟon for the services because the full funding was not available. The SBA did not award a new, valid

contract for postage meter services, but the Agency conƟnued to receive those services. The previous contract

for the postage meter services expired in September 2010, and services stopped in March 2012—resulƟng in

$22,711.50 in unauthorized commitments. AddiƟonally, the Program Office responsible for the contract did not

aƩempt to address the unauthorized commitments and award a new contract unƟl the vendor stopped providing

services. This stop in service directly impacted 14 SBA Field Offices that ran out of postage. If the COR had coor‐

dinated with his/her Program Office to receive funds for the next contract and planned for a new contract, the

stop in services would have been prevented.

How can I prevent an unauthorized commitment?

Unauthorized commitments can be prevented by ensuring that all (1) contract acƟons are made by the CO, and

(2) contracts for required products or services are planned for and fully funded. Only a warranted CO has the

authority to execute or make changes to a contract. As an SBA employee, if the COR or a Program Office has any

doubt, the following suggesƟons below can help prevent future unauthorized commitments:

 Know the definiƟon of an unauthorized commitment. Remember an unauthorized commitment is an

24 Report Number 13‐14
     

                           

                   

                           

                     

                              

                             

                                   

                                

                                 

           

                               

         

                               

                  

                         

                                  

                                   

                                

                                

                         

                            

               

                                        

                               

                                

                              

                         

                                      

                                      

                               

   

                                   

                                  

                               

                            

               

   

agreement between a vendor and a government representaƟve that is not binding because the agree‐

ment was not made between a CO and a vendor.

	 Understand that as a COR, you act as the CO’s authorized representaƟve for contract administraƟon

funcƟons and have no other authority in regards to the contract.

	 Monitor any contract where you are the designated COR and monitor the period of performance. Do

not make changes to the scope, price, schedule, or terms and condiƟons of any contract.

	 Do not give any direcƟon to a vendor that alters the terms of work of a valid contract.

	 Do not authorize a vendor to begin work if the CO has not executed a contract.

 Plan acquisiƟons with enough lead Ɵme for a CO to award a new contract based upon the guidelines

outlined by the AcquisiƟon Division.

 Project future products or services required by your Program Office, and include this informaƟon in the

SBA Annual AcquisiƟon Plan.

 Provide full funding to cover the period of performance for the contract to the AcquisiƟon Division when

awarding a new contract or exercising an opƟon year.

What should I do if an unauthorized commitment occurs?

If an SBA employee believes an unauthorized commitment has occurred, the applicable COR should immediately

noƟfy the CO of any violaƟon of, or deviaƟon from, the technical requirement of the contract. AŌer an unauthor‐

ized commitment occurs, it needs to be raƟfied by the Head of the ContracƟng AcƟvity so the commitment can

become valid and the vendor can receive payment. AddiƟonally, noƟfying the CO and the AcquisiƟon Division

will help to idenƟfy the correct contractual method to recƟfy the issue. Most importantly, having a valid contract

in place for products or services prevents any possible stop in services.

What is raƟficaƟon?

An unauthorized commitment must be raƟfied before the related invoice can be paid. According to the FAR Sub‐

part 1.602‐3—RaƟficaƟon of unauthorized commitments, raƟficaƟon is the act of approving an unauthorized

commitment by an official who has the authority to do so. The FAR also clearly states that raƟficaƟon should not

be used in a manner that encourages such commitments to conƟnue to be made by Government personnel with‐

out proper authority. The FAR also outlines a general raƟficaƟon process to pay invoices resulƟng from unau‐

thorized commitments. In addiƟon, the SBA’s internal procedures require that a raƟficaƟon file include a legal

review, funding review, vendor statements, employee statements, and a wriƩen DeterminaƟon and Findings

(D&F). The D&F should describe the events leading up to the need for the raƟficaƟon, include an explanaƟon of

the situaƟon surrounding the acƟon, and a recommendaƟon from the CO on whether or not to raƟfy. If the un‐

authorized commitment is raƟfied and the products or services are sƟll required, a new contract must be award‐

ed.

Example of the RaƟficaƟon Process 

The Agency received a large number of invoices from a vendor for a contract where the period of perfor‐

mance ended and the SBA conƟnued to receive services. To idenƟfy the universe of invoices, the AcquisiƟon

Division had to determine which invoices were associated with acƟve or new contracts, which invoices were

duplicates, and which invoices included previous charges from other invoices. Next, the AcquisiƟon Division

25	 Report Number 13‐14
     

                             

                           

                       

                              

                   

                         

                                    

                               

                 

                               

                            

                             

                                    

   

       

                   

                           

             

had to (1) determine why the unauthorized commitment occurred; (2) determine if funding was available at

the Ɵme the unauthorized commitments occurred; (3) determine if funding is sƟll available from the fiscal

year unauthorized commitment occurred for raƟficaƟon; (4) obtain statements from the vendor and the re‐

sponsible employee; and (5) determine if the SBA received the products or services. AŌer the AcquisiƟon

Division completed these steps, a raƟficaƟon determinaƟon could be made.

Can I be held responsible for an unauthorized commitment?

In a situaƟon where an unauthorized commitment cannot be raƟfied, the SBA can take administraƟve, financial,

or legal acƟon against the program official(s) who illegally bound the government without the authority to do so.

AddiƟonally, employees who purport to bind the government without the authority to do so violate the Stand‐

ards of Ethical Conduct for Employees of the ExecuƟve Branch, and may be held personally liable, financially, for

such commitments. If an unauthorized commitment cannot be raƟfied, the vendor then has the opƟon take legal

acƟon against the employee to receive payment for the total value of the unauthorized commitment(s). Addi‐

Ɵonally, if an AnƟ‐Deficiency Act violaƟon occurred because of an improper raƟficaƟon, the raƟfying official can

be charged and sentenced, if convicted, with up to two years imprisonment and/or up to a $5,000.00 fine.

Sources

 FAR Subpart 1.602‐2, “ResponsibiliƟes”
 

 FAR Subpart 1.602‐3, “RaƟficaƟon of unauthorized commitments”
 

 SBA COR Appointment LeƩer, available on the SBA AcquisiƟon Intranet Webpage
 

 SBA SOP 00 11 1, Small Purchases, Contracts, Grants, and CooperaƟve Agreements, February 1985
 

26 Report Number 13‐14
     

         

     

                        

                                

                               

                                    

                                   

                                          

                                

                               

                           

                        

                     

                                 

                      

                          

                                     

                          

           

  

                                       

                   

                                    

                           

                 

                                 

                                    

                       

      

                             

         

                               

                                  

                           

                             

                                     

                                         

         

   

Appendix III: Contract Management RegulaƟons

and EffecƟve PracƟces

This appendix provides informaƟon about effecƟve pracƟces and regulaƟons for contract management including

acquisiƟon planning, contract funding, and contract closeout. The goal of this appendix is to provide SBA employ‐

ees with more detailed informaƟon in areas we idenƟfied during our review where confusion occurred or more

training and guidance could be used. This appendix does not provide all of the informaƟon necessary to properly

plan for and manage contracts at the SBA, and SBA Program Office staff should work with the AcquisiƟon Division

on a regular basis. The sources provided at the end of this appendix should be used to supplement this guide in

addiƟon to the guidance and trainings available to SBA employees on the AcquisiƟon webpage on the SBA

intranet.

Contract Management

The Office of Federal Procurement Policy (OFPP) guidance states that good contract management is essenƟal to

improving contractor performance under federal contracts, and agency management needs to ensure that it

places a good contract management program as an agency priority. The OFPP Guide to Best PracƟces for Con‐

tract AdministraƟon states that contract management involves those acƟviƟes performed by government officials

to determine how well the government monitors and the contractor performs to meet the requirements of the

contract. Such management should encompass all dealings between the government and the contractor—from

preparing the AcquisiƟon Package and requesƟng proposals through contract closeout. The SBA’s Standard Op‐

eraƟng Procedure (SOP) 00 11 1 also provides guidelines that SBA employees should follow in order to have an

effecƟve acquisiƟon process within the SBA. Further, FAR Subpart 7.1—AcquisiƟon Plans and OFPP guidance for

contract management also require that Program Office staff:

(1) Begin acquisiƟon planning as soon as the need is idenƟfied; preferably, well in advance of the fiscal year in

which the contract award or order placement is required.

(2)	 Monitor and provide oversight of their contract to ensure the desired outcome is achieved. One way to

monitor and provide oversight processes to the contract includes clearly idenƟfying the roles and responsibil‐

iƟes of those employees involved in the management process.

(3)	 Ensure that the employees managing contracts have the right skills and training to ensure that contracts pro‐

vide the needed goods and services to the government. One pracƟce toward doing this is to establish a Con‐

tracƟng Officers RepresentaƟve training program that prepares the representaƟves for successful contract

management and administraƟon.

(4)	 Have the controls and evaluaƟon tools in place to effecƟvely monitor contract performance and employees

making purchases for the agency.

AcquisiƟon Planning

Guidance on the SBA’s the internal AcquisiƟon webpage discusses the acquisiƟon process and the roles of the

COs and CORs. Specifically, it provides informaƟon to SBA employees about awarding a new contract by first

idenƟfying program needs, developing an AcquisiƟon Package, and submiƫng the AcquisiƟon Package by the

applicable deadlines. The website also provides guidance about awarding and monitoring a contract. In the situ‐

aƟon where a Program Office needs to exercise a contract opƟon year, the guidance shows that a COR only needs

to noƟfy the CO that the Program Office wants to use the opƟon year, and that available funds exist for the re‐

quired period of performance.

27	 Report Number 13‐14
     

         

                         

                             

                          

                                 

                                       

                                    

                             

                                     

                              

                                

                                   

                                

                                  

             

                 

                   

               

             

         

   

AddiƟonally, the AcquisiƟon Division developed guidance for the Program Office staff regarding the proper docu‐

mentaƟon and informaƟon required to submit an AcquisiƟon Package to the AcquisiƟon Division. The guidance

also provides informaƟon on compleƟng each of the documents required in the AcquisiƟon Package. Further,

guidance on the AcquisiƟon webpage also provides the required dates by which the AcquisiƟon Packages need to

be submiƩed to the AcquisiƟon Division in order for a new contract to be awarded before the Agency needs the

products or services. See Figure 1 for the basic descripƟon of the acquisiƟon process for a new contract.

Figure 1 Basic AcquisiƟon Process for a New Contract

If the SBA will sƟll need the products or services

aŌer the performance of the contract, the COR

must start the acquisiƟon process again by com‐

pleƟng a new AcquisiƟon Package.

Source: SBA‐OIG analysis of Agency documentaƟon.

Contract Funding

Federal regulaƟons state that every valid government contract should be fully funded because the government

may not authorize or make a payment where such payment would be in excess of the amount “available” and

obligated toward the contract. AddiƟonally, an agency must prove that unobligated funds are available to fund

the enƟre contract value for all non‐severable services prior to the award. Moreover, during a conƟnuing resolu‐

Ɵon, agencies only receive a fracƟon of their budget to fund day‐to‐day operaƟons so the process of awarding

and funding contracts is directly impacted. During a conƟnuing resoluƟon an agency cannot award a new con‐

tract for services or products past the date of the conƟnuing resoluƟon. Below are examples where agency fund‐

ing policies were misunderstood and unauthorized commitments occurred.

28 Report Number 13‐14
     

                       

                                        

                                   

                                     

                                    

                             

                                

                               

                               

               

                                     

                                   

                                    

                        

                             

                                        

                                      

                           

               

                                

                                  

                                

                           

                                         

                                              

                              

                                  

                                   

                   

         

       

       

         

   

Example 1 

An unauthorized commitment occurred for three months aŌer the original contract expired because full

funding was not provided to the AcquisiƟon Division to award a new contract. When the CO tried to award a

new contract in FY 2012 during a conƟnuing resoluƟon and obtain full funding from the program office, the

COR stated that (S)he “did not know why full funding was required for the contract because (s)he did not

have to fully fund the contract that expired in September 2011.” The CO subsequently explained to the COR

that the previous contract was incrementally funded, which is contrary to federal regulaƟons and contract

management best pracƟces. Even though the Program Office did not have enough funds available during the

conƟnuing resoluƟon for a 12– month period of performance, the Program Office could have provided funds

for services that aligned with end date of the conƟnuing resoluƟon to ensure the SBA received essenƟal ser‐

vices through a valid contract and not through unauthorized commitments.

Example 2 

In another example, the COR stated that (s)he did not submit an AcquisiƟon Package for a new contract on

postage meters because the program office did not have full funding for the contract due to the conƟnuing

resoluƟon. Instead of the COR working with his or her Program Office to obtain funding for the services re‐

quired, numerous unauthorized commitments occurred because the SBA conƟnued to receive these services.

AlternaƟvely, a contract could have been awarded for the period covered by the conƟnuing resoluƟon rather

than aƩempƟng to fund it for a full year. As directed by federal regulaƟons, Program Offices must be able to

provide the full funding for contracts prior to the award. If this funding is not provided, an acƟve contract

cannot be awarded and unauthorized commitments can occur aŌer the acƟve contract expires if the Pro‐

gram Office sƟll requires the products or services.

Contract Closeout

Another aspect of good contract planning includes the proper closeout of a contract. Contract closeout begins

when all services have been performed and the products or services were delivered. Closeout is completed when

all administraƟve acƟons have been completed, all disputes seƩled, and final payment has been made. In one

instance, we found an example of an improper contract closeout that resulted in unauthorized commitments. In

this instance, the COR did not properly plan for the closeout of the contract and the return of two leased vehicles

to the vendor by the end of the period of performance. As a result, the Agency did not return the two vehicles to

the vendor unƟl 42 days aŌer the end performance date. Contract documentaƟon shows that the COR contacted

the vendor aŌer the contract expired in an aƩempt to return the vehicles. However, due to poor coordinaƟon

between the Program Office and the vendor prior to the expiraƟon of the contract, the Agency incurred two un‐

authorized commitments.

Sources

 31 U.S.C. 1341(a)(1)(A) and (a)(1)(B) ‐ LimitaƟons on expending and obligaƟng amounts

 31 U.S.C. 1512(a) ‐ ApporƟonment and Reserve

 FAR Subpart 7.1 ‐ AcquisiƟon Plans

 FAR Subpart 32.7 ‐ Contract Funding

 FAR Subpart 52.232‐18 ‐ Availability of Funds

29 Report Number 13‐14
     

                 

                   

     

                   

      

                         

      

        

                   

	 71 Comp. Gen. 428 (1992) and GAO Decision B‐317139, Financial Crimes Enforcement Network—ObligaƟons 

under a Cost‐Reimbursement, Nonseverable Services Contract 

	 Office of Management and Budget, Office of Federal Procurement Policy, A Guide to Best PracƟces for Con‐

tract AdministraƟon, October 1994

	 Office of Management and Budget, Office of Federal Procurement Policy, Guidelines for Assessing the Acqui‐

siƟon FuncƟon, May 2008

	 SBA Standard OperaƟng Procedure 00 11 1, Small Purchases, Contracts, Grants, and CooperaƟve Agree‐

ments, February 1985

	 SBA AcquisiƟon intranet webpage

	 SBA COR Appointment LeƩer, available on the SBA AcquisiƟon intranet webpage

30	 Report Number 13‐14
     

       

   

                       

                                  

                                  

                                     

                                 

                                      

                           

                             

                             

                            

                               

                                

                                      

                                  

                                    

                                      

                           

                                   

                                      

                              

                                  

                                   

                                

                                        

                                 

     

             

                 

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Appendix IV: ContracƟng Officer’s RepresentaƟve

DuƟes and ResponsibiliƟes

This appendix provides informaƟon about effecƟve pracƟces and regulaƟons for ContracƟng Officer’s Repre‐

sentaƟve (COR). The goal of this appendix is to provide CORs with more detailed informaƟon in areas we idenƟ‐

fied during our review where confusion occurred or more training and guidance could be used. This appendix

does not provide all of the informaƟon necessary for CORs to perform their duƟes and comply with all federal

regulaƟons in the management of their contracts, and CORs should work with the AcquisiƟon Division on a regu‐

lar basis. The sources at the end of this appendix should be used to supplement this guide in addiƟon to the guid‐

ance and trainings available to SBA employees on the AcquisiƟon webpage on the SBA intranet.

COR’s Role in the Contract Management Process

Guidance from the Office of Federal Procurement Policy about best pracƟces for contract administraƟon states

that the COR plays a criƟcal role in ensuring successful contract outcomes and proper contract administraƟon

within the contract management process. A designated COR shall be a government employee who has been cer‐

Ɵfied and maintains cerƟficaƟon in accordance with the Office of Management and Budget memorandum on the

Federal AcquisiƟon CerƟficaƟon guidance. The COR assigned to monitor a contract works in the Program Office

that requested the contract for the products or services. It is essenƟal that those entrusted with COR duƟes be

competent in the pracƟces of contract administraƟon. Further, they should be aware of, and faithful to, the con‐

tents and limits of their delegaƟon of authority. As such, CORs must read and understand each contract closely

with their contracƟng officer (CO). It is also imperaƟve that the COR remain in close communicaƟon with the CO

and relay any informaƟon that may affect the commitments and requirements of the contract.

According to the FAR, the COR and CO must sign an Acceptance LeƩer that outlines the roles and responsibiliƟes

of the COR in monitoring each contract. The leƩer provides the COR the authority to serve as the Agency’s repre‐

sentaƟve for the technical monitoring and administraƟon of the contract, but with very specific limitaƟons. Spe‐

cifically, the COR cannot make changes to the scope, price, schedule, terms, and condiƟons of the contract.

Through the Acceptance LeƩer the COR is prohibited from performing 14 acƟons, six of which alter the contract

in a manner that would cause an unauthorized commitment to occur. These six acƟons, instead, must be per‐

formed by the CO who is the only person authorized to make changes to the contract. See Figure 1.

Figure 1 Six AcƟons CORs Shall Not Perform that Could Result in an Unauthorized Commitment, as Indicated in

the Acceptance LeƩer

 Modify the stated terms and conditions of the contract.

 Direct a contract to begin work prior to a contract award date (or Notice to Proceed let

ter).

 Issue instructions (oral or written) to a contractor to start or stop work.

 Approve items of cost not specifically authorized in the contract.

 Direct changes (oral or written) or provide any guidance in the work to the contractor,

which contradict the contract’s scope and terms and conditions or which may be misinter

preted as properly changing the contractual terms and conditions, but actually jeopardize

the rights of, or the benefits to the government, the contract, or both.

 Execute supplemental agreements to the contract.

Source: SBA AcquisiƟon Division COR Acceptance LeƩer Template

31 Report Number 13‐14
     

                                   

                                    

                                 

   

   

                   

      

Moreover, the COR must ensure that changes in the work or services, and resulƟng effects on delivery schedule,

are made through a formal, wriƩen modificaƟon issued by the CO before the vendor proceeds with the changes.

When a COR, and not the CO, makes commitments or changes to the contract, an unauthorized commitment will

occur.

Sources

 FAR Subpart 1.602‐2, “ResponsibiliƟes”

 SBA COR Appointment LeƩer

 Office of Management and Budget, Office of Federal Procurement Policy, A Guide to Best PracƟces for Con‐

tract AdministraƟon, October 1994

32 Report Number 13‐14
     

      

           

                           

                      

                                 

                              

                                   

                      

                           

                        

                           

          

                     

     

                       

               

         

                         

                 

               

   

     

     

   

   

  

                 

                

         

                    

                 

       

   

   

     

   

   

  

  

           

                       

              

             

                        

                     

                      

                         

       

                   

             

                       

                    

                 

                      

               

     

     

     

     

Appendix V: Unauthorized Commitments and

RaƟficaƟon Guidance from Other Federal Agencies

Through the compleƟon of a general web‐based search for “unauthorized commitment guides,” the audit team

obtained guidance about unauthorized commitments and raƟficaƟon from 10 different Federal agencies. The

guidance varies from agency to agency, but can generally be found as a detailed secƟon in the agency’s acquisi‐

Ɵon process manual or as a separate guidance supplement provided to agency personnel. AddiƟonally, guidance

from 9 of the 10 Federal agencies outlines the disciplinary acƟon that can be taken against those government

representaƟves that made an unauthorized commitment when the commitment cannot be raƟfied. One guide,

in parƟcular, states that individuals can be disciplined even when the unauthorized commitment is raƟfied de‐

pending upon the circumstances surrounding the unauthorized commitment. The following table provides a

summary of the informaƟon presented in each of the guides about unauthorized commitments and raƟficaƟon

developed by 10 Federal agencies.

Table 1 Guidance on Unauthorized Commitments and RaƟficaƟon for 10 Federal Agencies

Agency Unauthorized Commitment and RaƟficaƟon Guidance Source

Air Force The Air Force provides a 12‐page guide outlining the key terms and defi‐

niƟons, provides examples of how an unauthorized commitment can

happen, discusses steps for avoiding unauthorized commitments, condi‐

Ɵons that must be met for a raƟficaƟon, the raƟficaƟon process, and the

“DOs and DON’Ts” of contracƟng to help prevent government repre‐

sentaƟves from being involved in situaƟons where an unauthorized

commitment could occur.

82d ContracƟng Squadron:

Unauthorized Commit‐

ments and RaƟficaƟon

Guide, April 2012

Department of The guidance developed by DoC discusses the federal regulaƟons per‐ Commerce AcquisiƟon

Commerce taining to unauthorized commitments and raƟficaƟon. It also discusses Manual 1301.602: Depart‐

(DoC) examples of unauthorized commitments and applicable preventaƟve

measures as well as the mulƟ‐level review required for raƟficaƟon. The

guide further states that the informaƟon provided emphasis on the De‐

partment’s goals to minimize unauthorized commitments.

ment of Commerce, RaƟfi‐

caƟon of Unauthorized

Commitments, December

2009

Social Security

AdministraƟon

(SSA)

The SSA provides detailed informaƟon about unauthorized commit‐

ments on the website for the SSA Office of AcquisiƟon and Grants Acqui‐

siƟon InformaƟon. The website outlines the applicable federal regula‐

Ɵons and provides common examples of when unauthorized commit‐

ments can occur. It also advises vendors who have been directed to

provide goods and/or services to the SSA without the authorizaƟon of

the contracƟng officer to STOP. It further states that raƟficaƟon can

take several weeks to month, but that the SSA does not rouƟnely raƟfy

an unauthorized commitment.

AcquisiƟon InformaƟon:

Unauthorized Commit‐

ments – Avoid costly out‐of

‐pocket costs

Army The guide developed by the Army ContracƟng Agency provides its cus‐

tomers with a beƩer understanding of why unauthorized commitments

are of concern to the Army and how to avoid making an unauthorized

commitment. The guide also explains the procedures that must be fol‐

lowed to take correcƟve acƟon for unauthorized commitment and make

payment to the contract. It addiƟon, it provides the Army ContracƟng

Agency contracƟng personnel informaƟon on how the raƟficaƟon pro‐

cess must be completed.

Army ContracƟng Agency:

Unauthorized Commit‐

ments and RaƟficaƟon

Process Guide, June 2004

33 Report Number 13‐14
     

                                             

   

  

  

  

                 

                   

                        

                 

                      

               

                    

     

       

     

                       

           

               

           

   

                 

               

             

             

             

     

     

   

   

      

  

                 

                          

             

               

                 

                 

             

   

   

       

   

   

   

                      

             

               

                 

               

       

   

  

  

                 

               

                  

               

           

     

   

   

   

Agency Unauthorized Commitment        and RaƟficaƟon Guidance Source

NaƟonal Oceanic

and Atmospheric

AdministraƟon

(NOAA)

The NOAA guide provides program officers with a beƩer understanding

of why unauthorized commitments are of concern to the NOAA and

how to avoid making them. The guide also explains the procedures that

must be followed to take correcƟve acƟon for an unauthorized commit‐

ment and make payment to the Contractor. In addiƟon, it provides

NOAA customers, contracƟng personnel, and their chain of command

with the informaƟon on how the raƟficaƟon process must be

completed.

Unauthorized Commit‐

ments and RaƟficaƟon

Process Guide for the Pro‐

ject Office, June 2008

U.S. Marine Corps The U.S. Marine Corps guidance is a PowerPoint presentaƟon outlining

applicable laws and regulaƟons, definiƟon of unauthorized commit‐

ments and examples, what to do if an unauthorized commitment oc‐

curs, and raƟficaƟon process and required documentaƟon.

RaƟficaƟon of Unauthor‐

ized Commitments

Department of The guidance explains unauthorized commitments and the raƟficaƟon DHS AcquisiƟon Manual,

Homeland process by providing definiƟons; documentaƟons required by the indi‐ Subchapter 3001.602‐3,

Security (DHS) vidual who made the unauthorized commitment—including proof that

funds were available at the Ɵme of the unauthorized commitment oc‐

curred; examples of when unauthorized commitments cannot be raƟ‐

fied; and disciplinary acƟon.

RaƟficaƟon of unauthor‐

ized commitments, Octo‐

ber 2009

Food and Drug The FDA provides the policy and procedures for raƟfying unauthorized FDA Staff Manual Guides,

AdministraƟon commitments. The guide states that it is the goal of the FDA to mini‐ Volume III – General Ad‐

(FDA) mize the occurrence of unauthorized commitments, and only unauthor‐

ized commitments that meet FAR requirements and Department of

Health and Human Services AcquisiƟon RegulaƟons will be raƟfied.

AddiƟonally, the guide dictates the documentaƟon required to be sub‐

miƩed by the individual who made the unauthorized commitment

when requesƟng raƟficaƟon.

ministraƟon, Procurement

and Supply Management,

Procurement, RaƟficaƟon

of Unauthorized Procure‐

ment, September 2005

U.S. Central CENTCOM guidance provides a structured raƟficaƟon form outlining all Subchapter 5153.120‐5011

Command documentaƟon required for raƟficaƟon. It further describes unauthor‐ – CJTSCC RaƟficaƟon of

(CENTCOM) ized commitments and applicable disciplinary acƟon and requires the

individual to describe all steps taken to resolve the unauthorized com‐

mitment prior to raƟficaƟon, such as returning goods received.

Unauthorized Commit‐

ment AcƟon Form

General Services

AdministraƟon

(GSA)

The GSA guidance provides detailed informaƟon about the raƟficaƟon

process, required documentaƟon, legal ramificaƟons, and examples of

when an unauthorized commitment cannot be raƟfied. It also states

that the individual who made the unauthorized commitment must iniƟ‐

ate and document the request for raƟficaƟon.

GSA AcquisiƟon Manual,

Subchapter 501.602‐3,

RaƟficaƟon of unauthor‐

ized commitments, March

2005

Note: Summaries are not all inclusive of the informaƟon documented in the guides. Full text can be found through the

hyperlinked sources above.

34 Report Number 13‐14
     

         

       

 

 

 

 

Appendix VI: Agency Comments—SBA General

Counsel for the SBA Administrator

U.S. SMALL BUSINESS ADMINISTRATION
 

WASHINGTON, D.C. 20416
 

TO: John K. Needham 

Assistant Inspector General for Auditing, Office of Inspector General 

FROM: Sara D. Lipscomb /s/ originally signed 

 General Counsel 

DATE: March 13, 2013 

SUBJECT: Office of General Counsel Comments on OIG Draft Performance Audit Report 

for Project 12004: “The SBA’s 417 Unauthorized Commitments Impacted 

Mission‐Related Services and Increased Costs” 

The Agency appreciates the opportunity to review OIG’s draft report, and offers the following 

supplement to the Agency’s initial response dated March 4, 2013. 

Recommendation to the SBA Administrator: Determine whether it is appropriate and feasible 

to take administrative and/or legal actions against SBA employees making unauthorized 

commitments in instances where an unauthorized commitment cannot be ratified. 

Agency Response: The Agency agrees with this recommendation. Accordingly, SBA’s 

Administrator has delegated to the Office of General Counsel responsibility for determining 

whether it is appropriate, feasible, and, more importantly, legal to take administrative and/or 

legal action against SBA employees making unauthorized commitments in instances where an 

unauthorized commitment cannot be ratified. 

35 Report Number 13‐14
     

         

         

 

 

 

 

Appendix VII: Agency Comments—Chief AcquisiƟon

Officer and Senior Procurement ExecuƟve

U.S. SMALL BUSINESS ADMINISTRATION
 

WASHINGTON, D.C. 20416
 

TO: John K. Needham 

Assistant Inspector General for Auditing, Office of Inspector General 

FROM: Jonathan Carver /s/ originally signed 

Chief Financial Officer, Office of the Chief Financial Officer 

DATE:	 March 4, 2013 

SUBJECT: OCFO’s Comments on OIG Draft Performance Audit Report for Project 12004: 

“The SBA’s 417 Unauthorized Commitments Impacted Mission‐Related Services and Increased Costs” 

General Comments: 

OCFO appreciates the opportunity to comment on the OIG draft report regarding your review of 

SBA’s unauthorized commitments. We share your concern regarding the seriousness of potential ramifications surrounding unauthorized commitments. We concur that the SBA should take 

steps to eliminate any instance of occurrence and that utilizing agency staff and other resources 

to ratify these unauthorized commitments detracted, at times, from the daily operations of the 

agency. 

We appreciate that the OIG draft report acknowledges both the “numerous problems inherited” 

by the Acquisition Division (AD) and the improvements made since the transition of SBA’s 

procurement function. We would like to highlight the following OCFO actions: 

 Coordinated with the OIG on implementing an improved ratification process 

 Closed out or ratified all of the unauthorized commitments referenced in this draft report 

 Circulated a draft contracting SOP for comment, which in final form will promote the 

correct procedures of contract management and administration. 

We also agree that sustaining needed improvements necessitates an Agency-wide culture trans36	 Report Number 13‐14
     

_____________________________________________________________________________ 

formation. As the draft report states, this requires an “all-in” approach incorporating all offices 

at all levels of the Agency in order to drive accountability, improve communication, and enhance guidance – the very focal point of the OIG’s conclusions. As written, the draft report 

seems to conflict with its own conclusion by directing all responsibility to the CAO and SPE. 

We believe that the draft report suggests responsibilities extending beyond the scope of the AD, 

specifically in the areas of ethical conduct training for all employees and personnel actions resulting from unauthorized commitments. The AD is responsible for complying with the Federal 

Acquisition Regulation (FAR), which defines an unauthorized commitment and the processes 

for addressing the matter. 

We are dedicated to continuing improvement in our procurement processes and actively promote the elimination of unauthorized commitments; however, the accountability mechanism 

should not be driven by the Acquisition Division, which cannot take direct action against any 

employee outside of the AD. As your draft report states, all unauthorized commitments were 

made by non-AD personnel; however, the draft report failed to address whether any negative 

actions were taken against employees who made the unauthorized commitments. Responsibility for the relevant policies and procedures regarding personnel actions lies outside the scope of 

the AD. 

Please see our comments to the draft recommendations that follow. 

Recommendation 1: In the short‐term, issue a Procedural Notice identifying what an unauthorized commitment is and that under no circumstances should an unauthorized commitment 

occur. This Procedural Notice should also state that administrative and/or legal action may be 

taken against those employees who commit the Government without the authority to do so. 

The OCFO has circulated an updated contracting SOP for comment. We will include the 

expanded language in the final version, which negates the need for a Procedural Notice and 

is responsive to Recommendation 2. 

Recommendation 2: Update and implement the Agency standard operating procedures for acquisitions to include the information provided in the Procedural Notice on unauthorized commitments. 

The OCFO has circulated an updated contracting SOP for comment. We will include the 

expanded language from Recommendation 1 into the final version. 

Recommendation 3: Develop a separate acquisition process guide for SBA staff specific to unauthorized commitments and the ratification process. 

37 Report Number 13‐14
     

We disagree that an unauthorized commitments-specific guidance document for distribution 

to SBA employees will result in achieving the needed improvements in outreach and communication. The OCFO will examine how it can take part in the “all in” agency-wide approach to eliminate unauthorized commitments, as stated in our general comments above. 

Recommendation 4: Update the COR Acceptance Letter to include that SBA staff assigned as a 

COR will not make an unauthorized commitment, and will follow guidance related to unauthorized commitments. 

The COR Acceptance Letter addresses what a COR is “allowed” to do, it does not address 

all instances of what a COR “cannot do nor shouldn’t do.” This is not the most appropriate 

place for this type of information, but we look forward to further discussion with the OIG to 

address this concern. 

Recommendation 5: Consider options for incorporating compliance with the COR Acceptance 

Letter and Federal Acquisition Regulations into the annual performance assessment for those 

SBA employees certified as CORs. 

While the personal performance plans for CORs are outside the scope of the AD’s 

authority, the Agency’s new performance management system, the Talent Management 

Center, includes a performance element that ties responsibilities for CORs to the annual performance plans for CORs at the SBA. This went into effect for FY 2013. 

Recommendation 6: Provide annual training to SBA employees involved in the acquisition process on properly planning for and managing contracts at the beginning of the fourth quarter to 

include addressing how unauthorized commitments occurred in the past and how to prevent 

them. 

We will include this in the ongoing training conducted at the agency. As well, we believe 

this to be a part of the “all in” agency-wide approach mentioned in our comments above. It 

could be more effective to have this training at an employee’s on-boarding, or in a means 

similar to other required annual employee training (e.g. IT security or “CSAT”), which is 

provided to employees through a training module taken via computer. 

38 Report Number 13‐14