Department of Homeland Security

Office of Inspector General 

Challenges Facing FEMA's 


Disaster Contract Management
 

OIG-09-70 May 2009 
 

Office of Inspector General 

U.S. Department of Homeland Security

 Washington, DC 25028 

 May 27, 2009 

Preface 

The Department of Homeland Security (DHS) Office of Inspector General (OIG) was 

established by the Homeland Security Act of 2002 (Public Law 107-296) by amendment 

to the Inspector General Act of 1978. This is one of a series of audit, inspection, and 

special reports published as part of our oversight responsibilities to promote economy, 

effectiveness, and efficiency within the department. 

This report addresses the strengths and weaknesses of the Federal Emergency Management 

Agency’s disaster contract management. We contracted with the independent public 

accounting firm of Foxx & Company to perform the audit. The contract required that Foxx 

& Company perform its audit according to generally accepted government auditing 

standards. Foxx & Company identified three areas where FEMA’s disaster contract 

management should be improved. The report contains four recommendations addressed to 

the Director, Acquisition Management Division. 

Foxx & Company is responsible for the attached auditor’s report dated May 8, 2009, and 

the conclusions expressed in the report. 

The recommendations herein have been developed with the best knowledge available to 

our contractor. We trust that this report will result in more effective, efficient, and 

economical operations. We express our appreciation to all who contributed to the 

preparation of this report. 

Richard L. Skinner 


Inspector General 

May 8, 2009 

Mr. Matt Jadacki 

Deputy Inspector General for Office of Emergency Management Oversight 

Office of Inspector General 

Department of Homeland Security 

245 Murray Drive, SW, Building 410 

Washington, DC 20528 

Dear Mr. Jadacki: 

Foxx & Company performed an audit of Selected FY 2007 Federal Emergency 

Management Agency (FEMA) Disaster Contracts. The audit was performed according to 

Task Order No. TPDFIGBPA070007, dated September 14, 2007. 

This report presents the results of the audit and includes recommendations to help 

improve the FEMA’s Acquisition Management Division’s management and oversight of 

disaster contracting. 

Our audit was conducted according to applicable Government Auditing Standards, July 

2007 revision. The audit was a performance audit as defined by Chapter 1 of the 

Standards, and included a review and report of program activities with a compliance 

element. We did not perform a financial audit, the purpose of which would be to render 

an opinion on the agency’s financial statements. 

We appreciate the opportunity to have conducted this audit. Should you have any 

questions, or if we can be of any further assistance, please call me at (513) 639-8843. 

Sincerely, 

FOXX & COMPANY 

Martin W. O’Neill 

Partner 
Table of Contents/Abbreviations 


Executive Summary.............................................................................................................1
 

Background..........................................................................................................................2
 

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

Contract Management System .......................................................................................5 


Recommendation ...........................................................................................................9
 

Management Comments and Contractor Analysis ........................................................9 


Administration of Individual Contracts .........................................................................9 


Recommendation .........................................................................................................17
 

Management Comments and Contractor Analysis ......................................................18
 

Communications and Knowledge Transfer .................................................................19 


Recommendation .........................................................................................................21
 

Management Comments and Contractor Analysis ......................................................21
 

Appendices 

Appendix A: Purpose, Scope, and Methodology.......................................................22 


Appendix B: Management Comments on the Draft Report ......................................24 


Appendix C: Contract Cost Increases........................................................................27 


Appendix D: List of Related Reports ........................................................................28 


Appendix E: FEMA Organization Chart...................................................................30 


Appendix F: FEMA Acquistion Management Division Organization Chart ...........31 


Appendix G: Report Distribution ..............................................................................32 


Abbreviations 

AMD FEMA Acquisition Management Division 


COTR Contracting Officer’s Technical Representative 


DHS Department of Homeland Security 


FAR Federal Acquisition Regulation 


FEMA Federal Emergency Management Agency 


FY fiscal year 


GAO Government Accountability Office 


JFO Joint Field Office 


OIG Office of Inspector General 


SOP Standard Operating Procedures 


VAO Virtual Acquisition OfficeTM
 
OIG
 

Department of Homeland Security 

Office of Inspector General 

Executive Summary 

Foxx & Company audited a selected sample of the Federal Emergency 

Management Agency’s (FEMA’s) Acquistion Management Division 

fiscal year 2007 disaster contracts. The audit objectives were to assess 

FEMA’s management of the contracts; assess communications and 

coordination within FEMA regarding disaster contracts; evaluate 

safeguards against fraud, waste, and abuse; and assess the impact of 

deficiencies on the delivery of goods and services. 

FEMA’s tracking, managing, and monitoring of contracts needs 

improvement. Several contracts requested could not be found in a 

timely manner; some could not be found at all. Most of the contract files 

reviewed needed to have more documentation to demonstrate effective 

communications and knowledge transfer between contracting officials. 

FEMA was not in compliance with the Federal Acquisition Regulation 

or Acquisition Management Division’s contracting policies and 

procedures for emergency acquisitions for most of the contracts 

reviewed. More documentation was needed to explain the reasons the 

goods or services were acquired, provide evidence of competition, and 

document contractor performance. FEMA did not follow acquisition 

process safeguards such as including documentation justifying sole 

source awards, verifying proof of inspection of goods, or completing the 

checklists of required contract documentation. 

As a result, it was difficult to determine that contractors were 

performing as required or that FEMA was paying fair prices for goods 

and services. More oversight of the contracts is needed to provide better 

management control and preclude creating an environment that provides 

opportunities for fraud, waste, and abuse. FEMA recognizes these 

problems and has begun taking steps to correct these situations. 

We are making four recommendations that, if implemented, will result 

in improved contract management and decreased risk of fraud, waste, 

and abuse. 

FEMA’s response is summarized and evaluated in the body of this report 

and included in its entirety as Appendix B. 

Challenges Facing FEMA’s Disaster Contract Management 

Page 1 
 

Background 

State and local government agencies and organizations act as first 

responders to emergencies (natural and manmade). When state 

and local governments become overwhelmed by the size or scope 

of a disaster, state officials may request assistance from the federal 

government. President Carter issued Executive Order 12127 in 

July 1979 that merged many separate disaster-related federal 

functions into the Federal Emergency Management Agency 

(FEMA). Following the terrorist attacks of September 11, 2001, 

the Homeland Security Act of 2002 (Public Law 107-296) 

transferred FEMA to the newly formed Department of Homeland 

Security (DHS). 

To meet urgent needs in past disasters, FEMA’s tendency had been 

to acquire goods and services quickly, but with insufficient 

attention to costs, definition of requirements, and competition. 

Reports issued by Congress, the White House, federal Office of 

Inspectors General (OIG), and the Government Accountability 

Office (GAO), among others, identified issues including 

contracting deficiencies (see Appendix D). 

In fiscal year (FY) 2004, FEMA spent almost $1 billion for goods 

and services. Spending rose to almost $5 billion in FY 2005 and to 

more than $7 billion in FY 2006. Most of the increase in these 2 

years was attributable to the response to the 2005 Gulf Coast 

hurricanes. By FY 2007, FEMA’s overall spending had fallen to 

about $1.5 billion; for FY 2008, it was $1.8 billion (see Figure 1). 

Challenges Facing FEMA’s Disaster Contract Management 

Page 2 
 Figure 1: FEMA’s FY 2004–2008 Acquisition Spending 

FEMA Acquisition Spending 

$8 

Billions 

of 

Dollars 

6 

4 

2 

0 

2004 2005 2006 2007 2008 

Fiscal Year

 Source: Federal Procurement Data System—Next Generation Data 

With so much spending at stake, it is imperative that acquisition 

officials take the steps necessary to ensure successful disaster 

contracting outcomes. Documentation and information on each 

contracting action required by the FAR must be in place to provide 

a complete history of the contract process, and serve as a basis and 

support for acquisition decisions. This is the focus of our report. 

Recent audits and congressional testimony have identified 

deficiencies, as well as opportunities for improvement, in other 

aspects of FEMA's disaster acquisition process.1 

To illustrate, an August 2008 OIG report stated FEMA could 

improve the operation and control of its Individual AssistanceTechnical Assistance Contracts (IA-TACs; tasks include 

construction of temporary sites for trailers and mobile homes to 

house disaster victims) by employing an adequate number of staff 

to: 

• conduct adequate acquisition planning, 


• obtain timely cost/price analyses prior to contract award, 


• perform contract monitoring, 


• inspect and accept goods and services, and 


• hold contractors compliant to terms of contracts.2 

1 See Appendix D. 


2 DHS OIG, Hurricane Katrina Temporary Housing Technical Assistance Contracts, OIG-08-88, August 


2008.
 

Challenges Facing FEMA’s Disaster Contract Management 

Page 3 
With respect to Hurricane Katrina relief funds obligated to IATACs in 2006, this report cited “uncontrolled growth in the 

amount of the funds obligated and expended under the contracts,” 

questioned “how FEMA determined that the amounts invoiced 

were allowable and reasonable,” and stated that the acquisition 

“environment provided opportunities for fraud, waste, and abuse to 

occur.” In addition, the report stated that the reviewed contracts 

had insufficient or missing documentation and that it was unclear 

how FEMA determined whether contractor invoices were 

allowable and reasonable.3 

According to congressional testimony in September 2008, GAO 

identified DHS acquisition oversight as needing improvement and noted 

“cases in which DHS components lacked the capacity to oversee 

contractor performance due to limited expertise and workload demands.” 

GAO also stated that none of the oversight plans and contract documents 

they reviewed contained specific measures for assessing contractor 

performance. Additionally, GAO noted that improving acquisition 

outcomes has been an ongoing challenge since DHS was established in 

2003.4 

An OIG report issued in February 2009 on internal controls in 

FEMA’s disaster acquisition process called for implementation of 

additional safeguards to protect assets and prevent and detect 

errors.5

 Another OIG report recommended implementation of an 

oversight process to improve the efficiency and effectiveness of 

FEMA’s acquisition program and creation of systems to document 

and share useful “lessons learned” throughout the acquisition 

function.6 

For this audit, DHS OIG contracted with Foxx & Company to 

evaluate the effectiveness of FEMA’s disaster contract 

management. The audit objectives were to: 

•	 Assess FEMA’s ability to track, manage, and monitor nonGulf Coast disaster contracts; 

•	 Determine what safeguards were included to reduce, deter, 

and detect fraud, waste, and abuse; 

3

 DHS OIG: Hurricane Katrina Temporary Housing Technical Assistance Contracts, OIG-08-88, August 


2008. 


4

 GAO: Department of Homeland Security: Progress and Continuing Concerns with Acquisition 


Management, GAO-08-1164T, September 17, 2008. 
 5

 DHS OIG: Internal Controls in FEMA’s Disaster Acquisition Process, OIG-09-32, February 2009. 
 6

 DHS OIG: FEMA’s Implementation of Best Practices in the Acquisition Process, OIG-09-31, February
 

2009. 


Challenges Facing FEMA’s Disaster Contract Management 

Page 4 
•	 Assess the level of communication and coordination within 

FEMA regarding disaster contracts; and 

•	 Assess to what extent processes and controls have not been 

followed and determine their impact on the delivery of 

goods and services. 

We reviewed 32 FY 2007 disaster contracts for compliance with 

the FAR and with supporting and pertinent Acquisition 

Management Division (AMD) policies and procedures. [In 

January 2009, the Office of Acquisition Management was renamed 

the Acquisition Management Division as part of a FEMA 

Management Directorate realignment. See Appendix F for 

updated organization chart.] 

Results of Audit 

FEMA was not following pertinent FAR requirements or AMD’s 

contracting policies and procedures for emergency acquisitions for 

most of the contracts reviewed. Several contracts requested were 

not located in a timely manner and some could not be found. For 

the contracts we reviewed, more documentation was needed to 

demonstrate that FEMA was effectively tracking, managing, and 

monitoring contracts. Furthermore, additional documentation was 

needed to demonstrate effective communications and knowledge 

transfer between contracting officials. 

Although these deficiencies are substantial, we were unable to 

determine the impact of these deficiencies on the delivery of goods 

and services because of the lack of documentation. 

FEMA contracting officials agreed that improvements are needed 

in its management and administration of disaster contracts and they 

are correcting deficiencies and improving compliance with the 

FAR and FEMA’s policies and procedures. 

Contract File Management System 

FEMA’s AMD needs an effective contract management system to 

identify, manage, or monitor the contracts. It did not have a 

consolidated list of disaster contracts awarded in FY 2007 readily 

available and it took more than a month for AMD to compile one. 

Challenges Facing FEMA’s Disaster Contract Management 

Page 5 
FAR requirements: 

•	 Section 4.801(a)-(b): The head of each office performing 

contracting, contract administration, or paying functions 

shall establish files containing the records of all contractual 

actions. The documentation in the files shall be sufficient 

to constitute a complete history of the transaction. 

•	 Section 4.802(d): If the contract files or file segments are 

decentralized to various organizational elements or to other 

outside offices, responsibility for their maintenance must be 

assigned. A central control and, if needed, a locator system 

should be established to ensure ability to locate promptly 

any contract file. 

To enable efficient access to FEMA’s contracts, FEMA should 

develop a contract management 

system that includes a locator A senior AMD 

system capable of ensuring that management official said 

contract files can be located in a that “Lots of files are 

timely manner. Currently, missing—probably 30%.”

individual contracting officials 

maintain contracts.7

 After we selected a sample of contracts to 

review, it took AMD more than 2 months to provide the 32 

contracts. Two of the contracts could not be located and substitute 

contracts had to be selected; however, the first substitute contract 

could not be located and another had to be selected. None of the 

files were in electronic format, which would have made them more 

accessible. 

Contracting officials did not follow AMD standard procedures or 

guidance for safeguarding contract documentation, including 

securing files in locked rooms or cabinets. Field offices and 

headquarters had facilities where files could be secured; however, 

some contract files were kept in or on unsecured desks. In several 

instances, contract files were stored in open boxes on the floor of a 

cubicle. 

FEMA officials acknowledged the problem of contracts not being 

organized, inventoried, or available. They cited the following 

reasons for contract unavailability: 

•	 Contracting officials kept the contracts at their desks or in 

their own filing cabinets. 

7

 Contracting officials include contracting officers, contract specialists, and contracting officer’s technical 

representatives (COTRs). Previously, some COTRs were called project officers. 

Challenges Facing FEMA’s Disaster Contract Management 

Page 6 
•	 Some of the contract files may have been lost or misplaced 

in AMD’s move to Patriots Plaza.8 

•	 Field staff said that when closing Joint Field Offices 

(JFOs), contract files were often returned to the regional 

offices in multiple folders that should have been 

consolidated by the regional office staff to provide the 

complete contract file. 

During the course of our audit, senior management acknowledged 

their concern about the agency’s delay in providing the list of 

requested contracts. One of the officials said that AMD wanted to 

ensure the contracting specialists were providing “the files 

requested and not to accept 

any excuses that the files were The contracting official who lost and could not be initiated the centralized file provided.” Another official room project said she said that they were tracking “began this effort due to her whether contracting officials frustration of not being able were being responsive to our to locate contract files.” 

requests or “if someone is 

holding out or using a lost file 

excuse” to avoid providing the file. 

FEMA is in the process of creating a centralized file room and 

inventory system for contracts maintained at its headquarters. It 

assembled a team of FEMA and contractor staff in April 2008 for 

this project. The contracting official leading this project said 

“There was no formal system in place and no one was responsible 

for centrally managing or monitoring the contract files.” By 

October 2008, more than 80% of the contract files were filed in the 

centralized file room and recorded in an electronic database. The 

project team is currently completing training for each of 60 AMD 

contracting specialists on how to manually and electronically 

retrieve contract files and records. In addition, AMD’s Strategic 

Scorecard includes an initiative to “design, develop, and 

implement a contract file management system in electronic and 

paper format” to achieve the outcome of having an “Effective Endto-End Knowledge & Information Management Enterprise.” 

8

 AMD moved in July 2007 from FEMA headquarters at 500 C Street S.W., Washington, DC, to AMD’s 

current location at Patriots Plaza, 395 E Street, S.W., Washington, DC. At the time of the move, no 

centralized location for the contract files existed at either location and all files arrived at Patriots Plaza in 

the boxes used to move them from their former site. 

Challenges Facing FEMA’s Disaster Contract Management 

Page 7 
Figure 2: AMD Contract File Room Before the Centralized 

File Room Project 

Source: FEMA 

Figure 3: AMD Contract File Room After Organization 

Project 

Source: FEMA 

Challenges Facing FEMA’s Disaster Contract Management 

Page 8 
Conclusion 

The inability to locate contract files hampers FEMA’s ability to 

ensure that contractors have fulfilled their obligations and that the 

government is meeting its contract administration responsibilities. 

Compliance with the FAR’s requirements for Government 

Contract Files, subpart 4.8, and relevant policies provides agencies 

with an increased level of assurance that the quality and 

completeness of their contract monitoring activities will result in 

satisfactory acquisition outcomes. 

Recommendation 

We recommend that the Administrator of FEMA: 

Recommendation #1: Complete establishment of the electronic 

file management system that includes a locator system that will 

enable users to locate contract files in a timely manner. Once the 

file management system is established, FEMA should begin 

storing contract files electronically. 

Management Comments and Contractor Analysis 

FEMA concurred with recommendation 1. FEMA said that senior 

leadership within the Acquisition Management Division, Management 

Directorate, is engaged in discussions regarding funding for an electronic 

contract file management system. If sufficient funds are available, a 

contract for the system could be awarded before the end of FY 2009. 

We consider FEMA’s planned action responsive to the 

recommendation. The recommendation is resolved and open 

pending FEMA’s implementation of an electronic contract file 

management system. 

Administration of Individual Contracts 

FEMA needs a contract management system that allows for 

effective management of individual disaster contracts. FEMA 

needs to improve and enhance its processes and procedures to 

enable it to track whether: 

•	 Required source selection procedures were followed, 

•	 Appropriate evaluations and oversight of contractor 

performance and FEMA contracting officials were 

performed, or 

Challenges Facing FEMA’s Disaster Contract Management 

Page 9 
•	 Increases in contract price or the quantities of goods or 

services required from those originally negotiated were 

justified. 

It was difficult to determine whether contracts were effectively 

managed and monitored or whether appropriate controls to prevent 

waste, fraud, or abuse were in place. 

Section 4.801(b) of the FAR states that the documentation in the 

contract files shall be sufficient to constitute a complete history of 

the transaction for the purpose of: 

•	 Providing a complete background as a basis for informed 

decisions at each step in the acquisition process, 

•	 Supporting actions taken, 

•	 Providing information for reviews and investigations, and 

•	 Furnishing essential facts in the event of litigation or 

congressional inquiries. 

Of the 32 contracts sampled, evidence of sound contract 

management, oversight, and documentation was lacking. The 

documentation was incomplete and inconsistent. For example, the 

file for a software upgrade, licenses, and support contract worth 

more than $1 million consisted only of a 10-page task order. 

According to section 4.802(a) of the FAR, contract files should 

among other things, document the basis for the acquisition and the 

award, the assignment of contract administration including 

payment responsibilities, and any subsequent actions taken by the 

contracting office. FEMA needs to ensure that the documentation 

in the files is sufficient to constitute a complete history of the 

contracting transactions. 

Source Selection Process 

About 30% of the contract files contained enough information to 

explain the source selection process and justification for the 

contractor selected. Two-thirds of the files contained insufficient 

information to enable us to ascertain if the contracts had been 

competitively awarded. As a result, the extent to which FEMA 

complied with FAR requirements concerning competitive 

procurements could not be determined. 

Section 6.303-1(a) of the FAR states “A contracting officer shall 

not commence negotiations for a sole source contract, commence 

negotiations for a contract resulting from an unsolicited proposal, 

or award any other contract without providing for full and open 

Challenges Facing FEMA’s Disaster Contract Management 

Page 10 
competition unless the contracting officer (1) Justifies, if required 

in 6.302, the use of such actions in writing; (2) Certifies the 

accuracy and completeness of the justification; and (3) Obtains the 

approval required by 6.304.” 

Information on the source selection process, such as a request for 

proposal, bid analysis, or similar documentation should be 

included in the contract file in accordance with guidance in the 

FAR. In many instances, the sole source or limited source 

justification was missing or not well documented. For example, 

one contract file contained price proposals from the successful 

contractor, but no information on the solicitation of other 

contractors’ proposals or how the price was determined to be 

reasonable. Competition is critical to ensuring that the government 

obtains the best value (in product or service and price) under the 

contract. 

In addition, Section 9.103(a)-(b) of the FAR states, “Purchases 

shall be made from, and contracts shall be awarded to, responsible 

prospective contractors only” and “No purchase or award shall be 

made unless the contracting officer makes an affirmative 

determination of responsibility.” 

Although the FAR states that contracts shall be awarded to 

responsible prospective contractors only, there was little evidence 

that contracting officials assessed the capabilities of prospective 

contractors. The government is at risk if the contractor does not 

have adequate resources, a satisfactory performance record, 

technical skills, or the ability to comply with the proposed delivery 

or performance schedule. 

Contractor Performance Monitoring and Oversight 

Effective monitoring and oversight is necessary to ensure that 

FEMA receives the goods and services for which it contracted. 

Monitoring and oversight are critical elements of the federal 

procurement process and encompass all interactions between the 

government and its contractors from the time contracts are 

awarded to closeout. 

AMD did not perform systematic or periodic reviews to identify 

deficient procurement practices and contract management 

procedures. Therefore, FEMA had little assurance that the terms 

of the contracts were properly enforced or that adequate oversight 

existed to ensure contractor compliance with statement of work 

requirements or specifications. Performing systematic or periodic 

Challenges Facing FEMA’s Disaster Contract Management 

Page 11 
reviews is especially important in light of the significant number of 

contract management staff hired over the past 2 years who have 

little disaster contracting experience. 

Several experienced AMD contracting officials said that 

improvements were needed in contract management, such as 

implementing more policies and standard operating procedures, 

ensuring consistency in headquarters and regional office 

operations, and having better communications and contract file 

management training. They also said that there was a need for 

more supervisory contract reviews as an incentive for staff to be 

more conscientious and attentive to contract file details and 

requirements. In addition, while recently there have been 

substantial hiring increases in AMD, the new acquisition personnel 

have had little disaster contracting experience and most have not 

had the opportunity to contract for goods and services in 

emergency or disaster-related situations. 

Although several officials stressed the importance of conducting 

supervisory contract reviews to provide instruction and ensure 

compliance, these reviews were not being performed. One senior 

management official said that a FEMA headquarters analyst used 

to perform reviews to ensure contract file compliance. One seniorlevel manager said that these reviews are essential; he conducted a 

contract review at a regional office in August 2008 and found that 

“the files were in disarray and current policies and procedures were 

not being followed.” This official said that AMD did not have 

travel funds to perform further reviews in FY 2008, but hoped to 

have travel funds in FY 2009 to complete two reviews per regional 

office per year. 

The lack of formal contract documentation reviews prevents the 

identification of deficiencies in policies, procedures, and practices 

and does not alert management to potential areas of vulnerability, 

areas needing improvement, or training needs. Performance 

evaluations from monitoring and oversight activities are essential 

to identifying a contractor’s adherence to schedules, ability to 

forecast and control costs, and commitment to satisfying the 

government’s specifications. Perhaps more important, evaluations 

identify and document substandard contract performance, which 

can protect the government in the event of litigation. 

Challenges Facing FEMA’s Disaster Contract Management 

Page 12 
Significant Contract Funding Increases 

Significant increases in the amount of federal funds obligated and 

spent occurred after negotiation of the initial contract costs in 

many of the contracts reviewed in our audit. However, 

explanations for the increases were not discernable in the contract 

documentation. In addition, it could not be determined if such 

increases violated competition requirements for federal 

acquisitions. 

The contracts we reviewed did not provide documentation on why 

costs were increased. Figures 4-6 illustrate some of these increases 

by dollar amount. (See Appendix C for a consolidated summary of 

the contract cost increases.) 

Figure 4: Contract Costs Less Than $100,000 

Disaster Contract Increases 

$0 

$20 

$40 

$60 

$80 

$100 

Pad 

leases 

Ice Copier 

leases 

IT 

support* 

Thousands 

*Information Technology support 

Original 

Contract 

Amount 

Total 

Funded

 Source: Foxx & Company using FEMA data 

Challenges Facing FEMA’s Disaster Contract Management 

Page 13 
Security 

Consulting 

IT hardware 

Office lease 

Office lease 

Housing leases 

IA TAC* 

 Figure 5: Contract Costs between $100,000 and $500,000 

Disaster Contract Increases 

$0 

$100 

$200 

$300 

$400 

$500 

Thousands 

Original 

Contract 

Amount 

Total 

Funded

*Individual Assistance Technical Assistance Contracts 

Source: Foxx & Company using FEMA data

 Figure 6: Contract Costs More Than $500,000 

Disaster Contract Increases 

$0.0 

$0.5 

$1.0 

$1.5 

$2.0 

$2.5 

$3.0 

$3.5 

$4.0 

$4.5 

Trailer set up PA TAC* IT support 

Millions 

*Public Assistance Technical Assistance Contracts 

Original 

contract 

amount 

Total 

Funded

 Source: Foxx & Company using FEMA data 

Increases in contract costs over the contract term are a concern and 

raise several questions, including: 

Challenges Facing FEMA’s Disaster Contract Management 

Page 14 
•	 Were the increases justified? 

•	 Did the government receive a fair return for what it 

eventually paid? 

•	 Why were FEMA contracting officers unable to better 

determine the true cost of goods or services being procured 

prior to the contract award? 

A related concern is whether artificially low initial contract 


estimates limit competition. For 


example, if FEMA initially 
 A contracting officer wrote solicited proposals for a $50,000 “We have to get the three 

contract, some companies or folders (contract files) ready 

suppliers might have chosen not for review. Let’s get COTR 

to bid. However, if the same letters in there and etc . . . .

add any other things that are 

required.”

companies or suppliers knew 

that the contract cost would 

ultimately be four or five times 

higher, they might have submitted bids. By limiting competition in 

this manner, the government may not be getting the best value. 

There may be valid reasons for increases in contract prices. For 

example, extensions to leases for trailer pads that house disaster 

victims may be needed if alternative housing cannot be found. 

However, such reasons should be documented in the contract file. 

For most of the files we reviewed, adequate documentation for the 

increases was not apparent. Contract files did not include evidence 

that FEMA contracting officials considered re-competing contracts 

in view of the significant increases experienced, thus missing 

opportunities for increased competition and lower prices. 

Contract Documentation 

The contracting officer’s technical representative (COTR) provides 

both technical and project management oversight during the 

contract lifecycle. Effective COTR performance is one of many 

factors that enhance the relationship between the contractor and 

government agency by adding value, fostering greater partnership, 

and promoting mutual attainment of business objectives. 

According to FEMA contracting guidance, each contract file 

should contain a letter designating the COTR and defining his or 

her responsibilities. Over 50% of the contract files did not contain 

the required COTR letters. In addition, the files did not contain 

enough information to properly document the COTR’s activities. 

Challenges Facing FEMA’s Disaster Contract Management 

Page 15 
 

Missing documentation from the contract files can lead to the 

inability to track the history and rationale for contract decisions. 

About 44% of the contracts reviewed did not contain 

documentation that properly explained the need for the goods or 

services purchased. We also found that subsequent to our request 

for the contracts, documentation was added to some of the contract 

files to make the files more complete. Three contracts included in 

our sample that closed in mid-2007 contained documents, dated 

June 2008, that FEMA personnel inserted into the contract files. 

Prompt contract closeout is critical to ensure that all government 

debts are paid and unneeded funds are de-obligated and made 

available for other uses. Although most of the contracts in our 

sample appeared to be completed, only 9 of the 32 contained 

closeout forms. Closeout forms and other required documents are 

specified in the FAR and in FEMA’s contracting guidance. Figure 

7 provides examples of the missing documentation that should be 

provided in accordance with FAR Subpart 4.8 and FEMA 

guidance. 

Figure 7: Missing File Documentation for the 32 Contracts 

Reviewed 

Contract File Documentation Number of 

files with 

documentation 

Number of 

files without 

documentation 

Information on the source selection 

process 

9 23 

Letter designating the COTR and 

defining his or her responsibilities 

14 18 

Documentation properly 

explaining the need for the goods 

or services purchased 

18 14 

Contractor performance 

evaluations or measures for 

assessing contractor performance 

0 32 

Contract closeout forms 9 23

 Source: Foxx & Company 

Challenges Facing FEMA’s Disaster Contract Management 

Page 16 
Conclusion 

Overall, management’s control environment for ensuring 

compliance with federal requirements was weak. Management did 

not routinely review contract files and did not ensure compliance 

throughout the organization. As a result, contract management and 

contract file contents varied by office and by contracting official. 

Also, the history of contract actions and decisions could not be 

identified. 

This confirms some of the findings contained in another recently 

issued report on FEMA’s acquisition internal controls.9 That 

report stated that many files could not be located, AMD did not 

have a standardized approach to documentation and file 

maintenance, and supervisors did not hold contracting officers 

accountable for maintaining contract files. We reiterate the 

recommendation in that report that the Director, AMD, require 

supervisors to monitor contract file maintenance and hold 

contracting officers and specialists accountable by including in the 

annual performance evaluation process an assessment of their 

contract file maintenance activities. In addition, we make the 

following recommendations. 

Recommendations 

We recommend that the Administrator of FEMA: 

Recommendation #2: Issue guidance reinforcing employees’ 

duty to comply with Federal Acquisition Regulation requirements 

for contract files so that each file provides a history of all 

contractual activities and an explanation of source selection, 

degree of competition, contractor performance, reasons for cost 

increases, scope changes, and determination of price 

reasonableness. The documentation should include explanatory 

memos, notes, email messages, and correspondence, as well as 

references to other files or locations that contain information 

supporting the acquisition. 

Recommendation #3: Ensure compliance with existing contract 

file maintenance regulations, policies, and procedures and provide 

a strong control environment in headquarters, regional offices, and 

field offices by: 

• Conducting periodic reviews of contract files, 

9

 DHS OIG: Internal Controls in the FEMA Disaster Acquisition Process, OIG-09-32, February 2009 

Challenges Facing FEMA’s Disaster Contract Management 

Page 17 
•	 Requiring that files provide an explanation for contracting 

decisions and actions, and 

•	 Initiating training programs designed to emphasize the 

importance of maintaining contract documentation 

consistent with federal requirements and agency policy. 

Management Comments and Contractor Analysis 

FEMA concurred with recommendation 2. FEMA issued in 

August 2008 a Standard Operating Procedure (SOP), Labeling and 

Organizing Official Contract Files, which instructed employees to 

prepare and maintain relevant acquisition documents supporting all 

award and modification decisions and actions. The contract file 

checklist attached to the SOP identifies the acquisition documents 

to be included in the contract files as well as their location within 

the six part file. 

We consider the SOP FEMA issued in August 2008 responsive to 

the recommendation. We consider the recommendation resolved 

and closed. 

FEMA concurred with recommendation 3. In November 2008, 

FEMA finalized a draft SOP for the internal audit of contract files. 

During the period January through March 2009, FEMA stated that 

it conducted the first internal audit of approximately 80 FY 2009 

contract awards and modifications to FY 2009 contract awards in 

Headquarters and throughout the regions. The reviews also 

included interagency agreement files. These internal audits of 

contract files will be conducted at least every quarter through the 

end of 2009. Reports from each quarter’s internal audit will be 

used as the basis to inform contract specialists and contracting 

officers of contract file deficiencies. 

We consider FEMA’s planned action responsive to the 

recommendation. However, the internal audits of contract files 

should be established as an on-going, periodic review with no end 

date. In addition, the OIG should receive copies of these quarterly 

reports. Furthermore, as recommended in a recent OIG report, 

FEMA should require supervisors to monitor contract file 

maintenance and hold contracting officers and contracting 

specialists accountable by including, in the annual performance 

evaluation process, an assessment of their contract file 

maintenance activities.10 The recommendation is resolved and 

10 DHS OIG, Internal Controls in the FEMA Disaster Acquisition Process, OIG-09-32, February 2009 

Challenges Facing FEMA’s Disaster Contract Management 

Page 18 
open until a policy is established to provide an ongoing, periodic 

review of contract files with no end date. 

Communications and Knowledge Transfer 

According to FAR Section 4.801(b), the documentation in the 

contract files shall be sufficient to constitute a complete history of 

the transaction. Specifically, Section 4.802 (c) states that files 

must be maintained at organizational levels to ensure (1) effective 

documentation of contract actions; (2) ready accessibility to 

principal users; (3) minimal establishment of duplicate and 

working files; (4) the safeguarding of classified documents; and 

(5) conformance with agency regulations for file location and 

maintenance. 

Most of the 32 contracts sampled had multiple contracting officials 

assigned during the contract period. Contracting officials said that 

the lack of effective communications and insufficient knowledge 

transfer, coupled with inadequate and inconsistent documentation 

in the contract files, made it difficult to effectively manage 

contracts. 

Significant transfers of contracts occur because of the nature of 

FEMA’s disaster management mission and the need to rotate staff. 

In addition, as Joint Field Offices (JFOs) close, responsibility for 

managing contracts is transferred from location to location and 

from person to person during the life of the acquisitions.11 High 

turnover rates within the AMD also result in contract files being 

reassigned to multiple contracting officials. 

To maintain continuity and accomplish knowledge sharing within 

FEMA, as well as with contractors, it is important that the recipient 

of a contract transfer be able to quickly understand the contracting 

decisions and the history of the acquisition. Accordingly, 

communications that occur during the acquisition process must be 

properly documented to transfer the knowledge needed to contract 

file recipients. 

11 When a disaster is declared, the Secretary of Homeland Security, in coordination with other federal 

departments and agencies, initiates actions to respond to and recover from the incident, including the 

establishment of a JFO. Within the JFO, senior federal representatives form a multiagency coordination 

entity and direct staff to share information, aid in establishing priorities among incidents and associated 

resource allocation, and provide strategic coordination of various federal incident management activities. 

As the need for full-time interagency coordination at the JFO ceases, the JFO releases federal resources and 

transfers remaining responsibilities and documentation to the appropriate FEMA field offices. 

Challenges Facing FEMA’s Disaster Contract Management 

Page 19 
The contract files we reviewed did not contain sufficient 

documentation to demonstrate effective communication and to 

facilitate reassignment to new contracting officials. For example, 

two contracting officers who inherited files from other contracting 

officers said that it was impossible to understand what was going 

on with the contract by reviewing existing documentation. 

Although FEMA developed contract file checklists to help manage 

the contracts, 22 of the 32 files—about 70%—did not include 

checklists. 

Contract management responsibilities were reassigned to different 

contracting officials due to 

turnover within AMD, as well An official said for one

as the rotation policy at JFOs. contract that it “...got Responsibility for some of the dumped to my desktop contracts in our sample had because no one ‘owned’ 

been assigned to contracting it.” officials without their 


knowledge. When we 


questioned these contracting officers, they could not answer 


questions about the contracts. 


Transfers between contracting officials without appropriate 

documentation make it difficult for the receiving contracting 

official to effectively manage the contracts. He or she may not be 

readily able to understand: 

•	 How or why decisions were made, 

•	 How to enforce the terms of the contract without vital 

contract information, 

•	 The status of delivery of goods or services, 

•	 Funds paid to date, 

•	 Outstanding issues with the contractor, if any, and 

•	 The oversight steps that should be performed. 

In September 2008, AMD issued a SOP that established FEMA 

acquisition policy regarding transferring disaster contract files 

from a JFO to the appropriate FEMA regional office. The 

procedure applies to all contract files created by procurement 

officials within a JFO in support of a disaster. It states that 

“Contract files will be transferred in a complete condition, will 

contain all documents in support of the particular acquisition, and 

will be transferred prior to the lead field contracting official’s 

departure.” The procedure includes a checklist that must be 

completed to ensure that the contract files and records are complete 

and ready for transfer to the appropriate regional office. 

Challenges Facing FEMA’s Disaster Contract Management 

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We asked if AMD had similar procedures and checklists for 

transferring contracts within AMD from one contracting official to 

another and for completing the contract closeout process once all 

contractor billings had been paid. AMD officials stated that AMD 

did not have such procedures or checklists, but said that these 

would be added to the list of procedures to draft and issue. 

Conclusion 

Contract files were frequently transferred between contracting 

officials. The transfers were made without effective 

communications or sufficient knowledge transfer. In addition, the 

contract files generally did not include adequate or consistent 

documentation to provide receiving contract officials the 

knowledge necessary to effectively manage the contract. 

Recommendation 

We recommend that the Administrator of FEMA: 

Recommendation #4: Develop a SOP for transitioning and 

closing contract files that requires a memorandum to provide the 

appropriate background and status information and a checklist for 

ensuring that the contract files are transferred in a complete 

condition and closed when all transactions are concluded. 

Management Comments and Contractor Analysis 

FEMA has developed a SOP for contract close-outs that is nearing 

completion. FEMA has also drafted a SOP for the transfer of 

contract files from one contracting officer to another that is under 

review. Both SOPs are scheduled for finalization no later than 

May 15, 2009. 

We consider FEMA’s actions responsive to the recommendation. 

Once the SOPs are finalized and issued, we will consider the 

recommendation resolved and closed. 

Challenges Facing FEMA’s Disaster Contract Management 

Page 21 
 

 

Appendix A 

Purpose, Scope, and Methodology 

The purpose of this audit was to assess FEMA’s management of 

disaster contracts. The FEMA disaster contracting function was 

challenged in responding to the 2005 Gulf Coast hurricanes, the 

nation’s most costly natural disasters, which killed more than 

1,800 persons, destroyed more than 300,000 Gulf Coast homes, 

and displaced about 1 million people. 

FEMA has implemented a number of significant changes in its 

acquisitions function since Hurricane Katrina. The DHS OIG audit 

focus has been primarily on contracting in the Gulf Coast states 

with less attention on contracts in other disasters. However, 

between October 1, 2006, and September 30, 2007, the President 

declared 65 major disasters, excluding those in Louisiana, 

Mississippi, and Alabama. Also, in June 2007, FEMA had 18 

Joint Field Offices in operation outside of those states. 

The goal of the audit was to determine how effectively FEMA 

managed disaster contracts outside of the Gulf Coast. The specific 

objectives of the audit were to: 

•	 Assess FEMA’s ability to track, manage, and monitor 

non-Gulf Coast disaster contracts; 

•	 Determine what safeguards were included to reduce, deter, 

and detect fraud, waste, and abuse; 

•	 Assess the level of communication and coordination within 

FEMA regarding disaster contracts; and 

•	 Assess to what extent the FAR and AMD policies and 

procedures have not been followed and determine the 

impact on the delivery of goods and services. 

The audit focused on a sample of 32 disaster contracts awarded 

directly by FEMA in FY 2007 for disasters declared in states other 

than Louisiana, Mississippi, and Alabama. FEMA is required to 

adhere to contract management policies and procedures that are 

promulgated in the FAR.12 FEMA also is required to adhere to the 

Homeland Security Acquisition Regulation and the Homeland 

Security Acquisition Manual, Office of Federal Procurement Policy 

guidance, and the Stafford Act.

13 

12 The FAR, codified in Title 48 of the United States Code of Federal Regulations, was developed pursuant 

to the Office of Federal Procurement Policy Act of 1974 (Public Law 93-400), as amended by Public Law 

96-83. 

13 FEMA’s statutory authority comes from the Robert T. Stafford Disaster Relief and Emergency Assistance 

Act, as amended. The Stafford Act was enacted in 1988 (Public Law 100-707), and it amended the Disaster 

Relief Act of 1974 (Public Law 93-288). 

Challenges Facing FEMA’s Disaster Contract Management 

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Appendix A 

Purpose, Scope, and Methodology 

The sample included contracts awarded at FEMA headquarters in 

Washington, DC, and at four FEMA regions: 

•	 Region II (New York City, NY) 

•	 Region III (Philadelphia, PA) 

•	 Region VI (Denton, TX) 

•	 Region VII (Kansas City, MO) 

We also visited FEMA’s Disaster Finance Center in Mt. Weather, VA, to 

obtain payment information on the contracts in our sample. 

Eight contracts were selected from each of the four regions noted above. 

The 32 contracts selected were based on (1) assessed risk, (2) OIG 

recommendations, and (3) to the extent practicable, the ability to relate 

the audit results to FEMA disaster contracting in general. Selection 

factors included: 

•	 Variety of contract type: time and materials, cost 


reimbursable, fixed price, and others 


•	 Dollar value: some large, medium, and small 

•	 Geographic dispersion 

•	 Scope and nature of the work 

•	 Sole source or competitive 

•	 Variety of contracting officers and contracting officer 


technical representatives. 


We conducted this performance audit according to generally 

accepted government auditing standards (Government Auditing 

Standards, July 2007 revision). 

Our audit considered FEMA and AMD policies and procedures 

implemented since the 2005 Gulf Coast hurricanes, as well as other 

applicable federal acquisition requirements. At all of the locations 

visited, we interviewed officials and obtained documentation to 

verify changes or corrective actions taken. Field office work was 

conducted from May to December 2008. 

Challenges Facing FEMA’s Disaster Contract Management 


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Appendix B 

Management Comments on the Draft Report 

Challenges Facing FEMA’s Disaster Contract Management 


Page 24 

Appendix B 

Management Comments on the Draft Report 

Challenges Facing FEMA’s Disaster Contract Management 


Page 25 

Appendix B 

Management Comments on the Draft Report 

Challenges Facing FEMA’s Disaster Contract Management 


Page 26 

 

 

Appendix C 

Contract Cost Increases 

Contract Cost Increases 

Services 

Original 

Contract 

Amount 

Total 

Funded 

Percentage 

Increase 

Trailer Set-up $94,250 $799,045 748% 

Pad Leases $1,200 $9,000 650% 

Ice $9,000 $63,200 602% 

Housing Leases $135,000 $398,189 195% 

IT Support $29,996 $87,932 193% 

Copier Leases $25,000 $73,000 192% 

Security $100,000 $235,657 136% 

IA TAC $236,337 $475,506 100% 

Office Lease $222,561 $374,561 68% 

Consulting – 

Project Management $109,182 $157,181 44% 

Office Lease $151,250 $214,129 42% 

PA TAC $2,180,000 $2,957,000 36% 

IT Hardware $121,342 $150,770 24% 

IT Support $3,313,577 $3,912,115 18% 

Source: Foxx & Company 

Challenges Facing FEMA’s Disaster Contract Management 

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Appendix D 

List of Related Reports and Testimony 

DHS OIG, FEMA’s Implementation of Best Practices in the Acquisition Process, OIG09-31, February 2009 

DHS OIG, Internal Controls in the FEMA Disaster Acquisition Process, OIG-09-32, 

February 2009 

DHS OIG, Challenges Facing FEMA’s Acquisition Workforce, OIG-09-11, November 

2008 

DHS OIG, Hurricane Katrina Temporary Housing Technical Assistance Contracts, OIG08-88, August 2008 

DHS OIG, Costs Incurred for Rejected Temporary Housing Sites, OIG-08-86, August 

2008 

DHS OIG, Hurricane Katrina Multitier Contracts, OIG-08-81, July 2008 

DHS OIG, Acquisition Workforce Training and Qualifications, OIG-08-56, May 2008 

DHS OIG, FEMA’s Preparedness for the Next Catastrophic Disaster, OIG-08-34, March 

2008 

DHS OIG, FEMA’s Award of 36 Trailer Maintenance and Deactivation Contracts, OIG07-36, March 2007 

DHS OIG, A Performance Review of FEMA’s Disaster Management Activities in 

Response to Hurricane Katrina, OIG-06-32, March 2006 

GAO, Department of Homeland Security: Progress and Continuing Concerns with 

Acquisition Management, GAO-08-1164T, September 2008 

GAO, Emergency Management: Observations on DHS's Preparedness for Catastrophic 

Disasters, GAO-08-868T, June 2008 

GAO, Department of Homeland Security: Better Planning and Oversight Needed to 

Improve Complex Service Acquisition Outcomes, GAO-08-765T, May 2008 

GAO, Department of Homeland Security: Better Planning and Assessment Needed to 

Improve Outcomes for Complex Service Acquisitions, GAO-08-263, April 2008 

GAO, Department of Homeland Security: Status and Accountability Challenges 

Associated with the Use of Special DHS Acquisition Authority, GAO-08-471T, February 

2008 

Challenges Facing FEMA’s Disaster Contract Management 

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Appendix D 

List of Related Reports and Testimony 

GAO, National Disaster Response: FEMA Should Take Action to Improve Capacity and 

Coordination between Government and Voluntary Sectors, GAO-08-369, February 2008 

GAO, Department of Homeland Security: Improved Assessment and Oversight Needed to 

Manage Risk of Contracting for Selected Services, GAO-07-990, September 2007 

GAO, Homeland Security: Observations on DHS and FEMA Efforts to Prepare for and 

Respond to Major and Catastrophic Disasters and Address Related Recommendations 

and Legislation, GAO-07-1142T, July 2007 

GAO, Catastrophic Disasters: Enhanced Leadership, Capabilities, and Accountability 

Controls Will Improve the Effectiveness of the Nation’s Preparedness, Response, and 

Recovery System, GAO-06-618, September 2006 

GAO, Hurricane Katrina: Planning for and Management of Federal Disaster Recovery 

Contracts, GAO-06-622T, April 2006 

Challenges Facing FEMA’s Disaster Contract Management 

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Appendix E 

FEMA Organization Chart 

Challenges Facing FEMA’s Disaster Contract Management 


Page 30 

Appendix F 

FEMA Acquisition Management Division Organization Chart 

Challenges Facing FEMA’s Disaster Contract Management 


Page 31 

Appendix G 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff for Operations 

Chief of Staff for Policy 

Acting General Counsel 

Executive Secretariat 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Under Secretary, Management 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

FEMA Audit Liaison 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as appropriate 

Challenges Facing FEMA’s Disaster Contract Management
 

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