DISTRICT OF

COLUMBIA

Authority Needs to

Improve Its

Procurement Practices

United States General Accounting Office

GAO Report to Congressional Requesters

August 1999

GAO/GGD-99-134

United States General Accounting Office General Government Division

Washington, D.C. 20548

Page 1 GAO/GGD-99-134 Procurement Practices

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August 18, 1999

The Honorable Ernest J. Istook, Jr.

Chairman, Subcommittee on the District of Columbia

Committee on Appropriations

House of Representatives

The Honorable Thomas M. Davis

Chairman, Subcommittee on the District of Columbia

Committee on Government Reform

House of Representatives

This report responds to your requests for a review of the procurement

practices of the District of Columbia Financial Responsibility and

Management Assistance Authority (Authority). 1

 As you are aware, the

Authority was established by Congress in 1995 to repair the District’s

failing financial conditions and to improve the effectiveness of its various

entities. To accomplish this, the Authority was given a wide range of

statutory authority and responsibility, including awarding contracts itself

and the review and approval of contracts awarded by the District, to

ensure the most efficient and effective service delivery.

Based on concerns regarding allegations of procurement improprieties at

the Authority, you requested that we determine whether applicable

procurement regulations and procedures were followed in awarding and

administering selected contracts on behalf of the Authority’s former Chief

Management Officer (CMO)2

 and to Thompson, Cobb, Bazilio and

Associates, a private accounting firm that is responsible for auditing the

Authority’s financial statements. We reviewed a total of 12 contracts and

their associated contract actions, which we selected based on your

specific concerns.3

 Ten of the contracts were awarded by the Authority

and totaled $13 million. The other two contracts were awarded by the

District’s Chief Procurement Officer (CPO) and totaled over $1 million.

Although we reviewed a total of 10 contracts that were awarded by the

Authority, we only assessed whether 9 of them were awarded and

administered in accordance with the Authority’s procurement regulations

 1

 The Authority is also referred to as the Control Board.

2

 In February 1999, the Authority accepted the resignation of its CMO.

3

 Contract actions include contract awards, modifications, and options.
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because 1 of the contracts in our review, Thompson, Cobb, Bazilio and

Associates (contract number FY96/FRA#2) was awarded before the

Authority’s regulations were adopted in March 1996. The Authority did not

provide us with any information on what procedures were followed in

awarding this contract.

. Appendix II contains information on the award

and administration of this contract.

As requested, we also determined whether the Authority and the District

received the goods and services that they contracted and paid for in the

contracts that we reviewed.

The Authority did not always comply with its procurement regulations and

procedures or follow sound contracting principles when it awarded and

administered the nine contracts that we assessed. In addition, the

Authority’s contract files for these contracts were incomplete. The files did

not generally contain documentation of the key contract award and

administration decisions as required by the Authority’s procurement

regulations. As a result of the incomplete contract files, the Authority

could not demonstrate that its objectives of (1) acquiring goods and

services at the lowest price or best value and (2) treating offerors fairly

were achieved for several of the contracts we reviewed.

The Authority’s procurement regulations provide for a preference for

competitively awarded contracts and require written justification and

approval of sole source contracts. The Authority’s contract files contained

evidence that it sought competition for seven of the nine contracts we

assessed. However, contrary to its regulations, the Authority did not (1)

document its basis for contract selection for three contracts, (2) include

written justification for one sole source contract award or a series of

“modifications” to another contract that, in effect, was a sole source

award, or (3) comply with other requirements in several cases.

The Authority’s contract files and information we obtained from two

contractors indicated that the Authority received the goods and services it

contracted for in six of the nine contracts we assessed. No documentation

was found in the Authority’s contract files to show whether the required

deliverables were received for the other two contracts. Contrary to the

Authority’s regulations, none of the contract files for the nine contracts we

assessed contained certification or any other evidence that the contractor

performed satisfactorily prior to payment of invoices. The Authority’s

procurement regulations do not specify any contract administration

requirements other than the certification provision to ensure that the

Authority gets what it paid for. Authority officials told us they relied on the

Results in Brief
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statements of work included in each contract to provide guidance in the

administration of its contracts. However, the statements of work for the

nine contracts and associated contract actions we assessed generally did

not include standards for measuring the contractor’s performance as

required by the Authority’s regulations.

For the two emergency sole source contracts awarded by the District

government, the District’s CPO did not comply with the Authority’s

contract review and approval regulations governing District contracts or

the District’s procurement regulations. First, the District’s CPO entered

into an emergency sole source contract totaling $153,800 with a consultant

firm for management reform services for the Authority’s former CMO

without justifying how the procurement qualified as an emergency

procurement or obtaining the Authority’s approval. Second, 4 months later,

he awarded another emergency sole source contract for $893,000 to the

same firm, once again for management reform services for the Authority’s

former CMO, but did not justify the emergency procurement or receive the

Authority’s approval as required by the regulations.

Several factors appeared to contribute to the Authority’s failure to comply

with its procurement regulations. For example, when Digital Systems

International Corporation (DSIC), a consultant firm retained by the

Authority, reported the results of its review of over 100 of the Authority’s

contracts in January 1999, it identified some of the same problems we did

and attributed the Authority’s contracting problems, in part, to its

emphasis on meeting mission requirements and lack of procurement

expertise. According to the Authority’s former Executive Director,4

 with

respect to the management reform contracts, the magnitude of the tasks

and the short time frame in which the Authority had to complete them

contributed to the Authority’s procurements not being as “tidy” as the

Authority would have liked.

DSIC made several recommendations to the Authority that, if effectively

implemented, should help to improve the Authority’s procurement

process. We are making additional recommendations to the Authority’s

Chair.

On April 17, 1995, the President signed the District of Columbia Financial

Responsibility and Management Assistance Act of 1995, P.L. 104-8, which

established the Authority to repair the District’s failing financial condition

 

4

 In May 1999, the Authority’s original Executive Director resigned. He was hired as the Executive

Director in June 1995. The Authority has since appointed another Executive Director.

Background
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and to improve the efficiency and effectiveness of its various agencies. The

Act also permits the Authority to

• contract for goods and services for its own mission,

• contract for goods and services on behalf of District agencies, and

• review and approve contracts processed by District agencies.

In addition, on August 5, 1997, the President signed into law the National

Capital Revitalization and Self-Government Improvement Act, Title XI of

P.L. 105-33. Under the Act, the Authority was directed to develop

management reform plans for nine agencies and four citywide functions.

The Act also required the Authority to award the management reform

consultant contracts within 30 days from the date of its enactment, unless

the Authority notified Congress, in which case the Authority could take 60

days.

The Authority is an independent entity within the government of the

District and is statutorily exempt from adhering to the District’s

procurement regulations. In addition, because the Authority is not an

agency of the federal government, it does not have to comply with federal

procurement statutes or regulations, such as the Federal Acquisition

Regulation. In March 1996, the Authority promulgated its own

procurement regulations that are intended to permit the procurement of

property and services efficiently and at either the least cost to or the best

value for the Authority. The Authority’s contracting authority is statutorily

vested in its Executive Director, who is also the designated Contracting

Officer. According to the Authority’s regulations, the Executive Director

may at any time waive5

 any provisions of the regulations, with the

exception of the provision regarding the avoidance of conflicts or

impropriety and the appearance of conflict or impropriety.

The Authority’s regulations prescribe some of the basic procurement

principles, including

• the avoidance of conflicts or impropriety and the appearance of conflict or

impropriety;

• a preference for competition among potential sources to ensure fair and

reasonable prices and best value for the Authority;

 

5

 The regulations do not state whether the waiver has to be in writing. According to the former

Executive Director, the provisions in the procurement regulations have never been waived.
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• use of sole source contracting only when it makes good business sense or

promotes the Authority’s mission and is justified in writing and, if the

contract exceeds $100,000 on an annual basis is approved by the

Authority’s Chair;

• identification of potential sources to achieve the benefits of competition;

• publication of the Authority’s requirements to make potential qualified

sources aware of the Authority’s requirements;

• preparation of statements of work that include a thorough description of

the required services, a delivery schedule, and standards for measuring the

contractor’s performance; and

• monitoring of contractor performance and certification of satisfactory

performance prior to payment of contractor invoices.

In addition, the Authority’s regulations prescribe procedures for simplified

and formal contracting. According to the regulations, the Executive

Director shall determine the type of procurement action that is appropriate

for the use of simplified contracting procedures. The regulations state that

simplified contracting procedures must be used when the value of the

procurement is not expected to exceed $100,000 and/or when the nature of

the goods or services to be provided is appropriate for these procedures.

Under simplified contracting, the regulations prescribe procedures for

obtaining competition, preparing written solicitations, evaluating

proposals, and awarding contracts. For example, the Executive Director is

responsible for making the final determination for contract selection based

on the written recommendation of the technical evaluation team.

The Authority’s regulations state that formal contracting procedures are

mandatory for contract actions that may result in the Authority’s

expenditure of $500,000 or more on an annual basis and may be used for

competitive contract actions estimated at less than $500,000. Under formal

contracting, the regulations prescribe procedures for preparing written

solicitations, evaluating proposals, and awarding contracts. For example,

the Executive Director’s decision for contract selection is required to be

supportable, documented, and based on the evaluation factors. In addition,

under the formal contracting procedures, the Executive Director may

conduct negotiations with qualified offerors. The regulations also require

that the negotiation sessions be fully documented whenever they occur.

The Executive Director is also required to perform cost/price analysis

when a single offer is received in response to a competitive solicitation or

when the contract will not have a fixed price. The regulations further state

that when fair and adequate price competition is obtained, a comparison

among proposed prices and to the Authority’s estimate is generally

adequate to verify that the prices offered are reasonable.
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Other than some requirements on the preparation and use of statements of

work, the Authority’s regulations do not prescribe specific requirements

governing contract actions between $100,000 and $500,000, nor do they set

forth specific requirements governing contract modifications or contract

options.

The Authority also promulgated regulations in November 1995 for

reviewing and approving contracts submitted by the District government.

These regulations describe in detail the proposed contracts that are

required to be submitted to the Authority for review and approval.

Examples include sole source contracts, contracts for services exceeding

$25,000, and any contract proposed as an emergency procurement. The

regulations further state that no contract that is required to be submitted

to the Authority shall be awarded unless the Authority has approved the

proposed contract or unless the Authority specifically declined to exercise

its power to review and approve the contract prior to award. Subsequently,

most recently on February 26, 1998, the Authority adopted resolutions

amending the regulations by modifying the definition of contracts required

to be submitted for review and approval.

According to the Authority’s procurement regulations, the Executive

Director may from time to time delegate specific contracting and

procurement responsibility and authority to various members of the

Authority’s staff. The Authority’s regulations also require that when

authority is delegated to a staff member to serve as a contracting officer,

the delegation is to be in writing. Prior to reorganizing in December 1997,

the Authority’s contracting staff consisted of a Director of Procurement

and full-time complement of five staff persons, including a Procurement

Analyst and two Contract Specialists6

. In early 1998, the Authority changed

the scope and magnitude of its procurement operations by reducing the

number of procurements done to support its own mission and reducing the

number of District contracts to be reviewed and approved. As of April

1999, there were two full-time staff— a Senior Procurement Specialist and

an independent contractor who served as the Contract Specialist—

involved in the award and administration of Authority contracts. The

Authority’s Executive Director, Deputy General Counsel, and Chief

Financial Officer also assisted these staff members. In addition, the

District’s CPO also awarded and administered several Authority contracts

on behalf of the Authority.

 

6

 According to the Authority, one of its two Contract Specialists was an independent contractor.
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In January 1998, the Authority hired a CMO to assist the Authority in

carrying out its management reform responsibilities. The CMO reported to

the Chairperson of the Authority and was responsible for overseeing the

management reform efforts for nine District agencies and four citywide

functions, including procurement. In February 1999, the CMO resigned

from her position.

From its inception in April 1995 through September 30, 1998, the Authority

reports that it awarded 141 contracts for almost $81 million. These

contracts include procurements done by the Authority to accomplish its

own mission or done by the Authority on behalf of the District.

We reviewed a total of 12 contracts and their associated contract actions

that were awarded in fiscal years 1996 through 1998. Ten of the 12

contracts were awarded by the Authority and the other 2 were awarded by

the District’s CPO. As stated previously, although we reviewed a total of 10

contracts awarded by the Authority, we assessed compliance with the

Authority’s regulations for 9 contracts because 1 contract (Thompson,

Cobb, Bazilio and Associates, contract number FY96/FRA#2) was awarded

before the Authority’s regulations were adopted in March 1996.

As you specifically requested, we focused on the contracts that were

awarded for the Authority’s former CMO and to Thompson, Cobb, Bazilio

and Associates. According to the Authority, 17 of its 141 contracts were

awarded on behalf of its former CMO; we judgmentally selected six of

those contracts to obtain a mix of management reform and executive

recruitment services contracts. We selected the other six contracts

because you specifically requested that we examine them. They include

the four contracts awarded to Thompson, Cobb, Bazilio and Associates by

the Authority and the two contracts awarded to Smart Management

Services by the District’s CPO. Appendix I provides additional information

on the contracts we reviewed, and appendix II contains additional

information on the award and administration of the contract awarded prior

to the adoption of the Authority’s regulations.

We reviewed the contract files to determine whether the Authority and the

District’s CPO followed applicable procurement regulations when they

awarded the contracts we assessed. For example, we reviewed the

contract files to determine whether (1) competition was sought, (2) the

basis for contract selection was documented, (3) sole source contracts had

written justification, (4) contractors’ performance was monitored, and (5)

the Authority received the required deliverables before payment of

invoices. To supplement our contract file review, we judgmentally selected

Scope and

Methodology
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three of the eight contractors who were retained by the Authority and the

District’s CPO to obtain a mix of contractors who were required to provide

management reform or executive recruitment services and visited them at

their offices to obtain information on the Authority’s procurement process.

For the contract that was awarded prior to the adoption of the Authority’s

regulations, we reviewed the information in the contract file to determine

what information was available to document key contract award and

administration decisions, including the basis for contract selection and

whether the file contained evidence that the Authority received the

services it paid for.

As stated previously, the regulations provide that the Executive Director

shall determine whether a particular request for procurement is

appropriate for simplified contracting. However, we found no

documentation in the contract files that this was done. Consequently, it

was not apparent which method of contracting was used by the Authority

to award Boulware a $105,000 contract because the regulations do not

specify which procedures, simplified or formal, apply to contracts that are

between $100,000 and $500,000.

In addition, we reviewed the Authority’s and District’s procurement

regulations and procedures, the Authority’s review and approval

regulations governing submission by the District for contracts, and

interviewed Authority and District officials involved in contract award and

contract administration. We also reviewed several reports of studies done

by other entities on the Authority and District’s procurement process.7

However, as agreed with your offices, we did not review the Authority’s

process or controls for ensuring that its review and approval regulations

governing District contracts were being followed.

Although our findings can only be applied to the contracts we reviewed,

other reviews of the Authority and District’s procurement processes have

reported similar findings and conclusions. For example, DSIC reviewed

 

7

 Report of Investigation Into The District’s Awarding of Certain Contracts and The Termination of

Employment of Mr. Michael T. Hernon, Government of the District of Columbia, Office of The

Inspector General, March 1999.

Report of the Audit of the District of Columbia Financial Responsibility and Management Assistance

Authority Contracts, Digital Systems International Corporation, January 1999.

A Crisis in Management: An Assessment of the Contracting Operations of the District of Columbia,

District of Columbia Financial Responsibility and Management Assistance Authority, March 6, 1997.
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over 100 Authority contracts that totaled $47.2 million and were awarded

between August 1995 and September 1998.

We conducted our review in Washington, D.C.; Houston, TX; and Chicago,

IL; from September 1998 to July 1999 in accordance with generally

accepted government auditing standards. We obtained comments on a

draft of this report from the Authority and the District’s CPO. These

comments are summarized in the agency comment section of this report

and are discussed in the report where appropriate. Appendix III contains

the Authority’s written comments and our specific responses to those

comments.

Although the Authority’s procurement regulations set forth some basic

requirements for contract award, we found that the Authority did not

always comply with its procurement regulations or follow sound

contracting principles for the nine contracts that we assessed. As stated

previously, the Authority’s former Executive Director was able to waive

almost any provision of the regulations; however, he stated that a waiver

was not granted for any of the contracts awarded by the Authority.

In its comments on a draft of this report, the Authority said that our

statement that “according to the former Executive Director, the provisions

in the procurement regulations have never been waived” is not quite

accurate. The Authority commented that its former Executive Director

said that its regulations had never been waived in writing. The former

Executive Director did not make this distinction when we met with him.

While the Authority’s regulations do not state whether the waiver has to be

in writing, we disagree with the Authority’s position that once a contract is

executed by its Executive Director and approved by the Chair, any

irregularities with respect to its award have been waived.

The failure to follow the Authority’s regulatory requirements could occur

at several stages in the contracting process, and the Executive Director

may not necessarily be aware of what regulatory requirements his

contracting staff may have failed to follow. If the execution of a contract

by the Executive Director constitutes a waiver of any Authority

contracting requirement, regardless of whether the Executive Director

knew of a contracting deficiency, there would be essentially no

accountability for the actions of the Authority or its employees. Such a

process would, in effect, render the regulations useless.

The contract files we reviewed indicated that the Authority sought

competition for seven of the nine contracts we assessed. However, the

The Authority Did Not

Always Comply With

Its Procurement

Regulations
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contract files contained little or no evidence that the Authority (1)

documented its basis for contract selection for the three contracts where it

is specifically required by the regulations; (2) prepared written justification

for one sole source contract award or a series of “modifications” to

another contract that, in effect, was a sole source award; or (3)

documented its contract negotiations as required by the regulations for the

two contracts where the Authority stated that negotiations had occurred.

After we completed our review of the ten contract files, we notified the

Authority of missing documents and requested that they be provided. On

May 21, 1999, the Authority’s former Executive Director provided us with a

letter to explain how he made his contract selection decisions, but did not

provide any additional documentation.

Of the 9 contracts we assessed, we found that the Authority did not

document its basis for contract selection, as specifically required by its

regulations, for the three contracts that were awarded to Managing Total

Performance, Management Partners, and the Urban Center. The

Authority’s regulations require the Executive Director’s decision for

contract selection to be supportable, documented, reasonable, and based

on the technical evaluation report for contracts that total $500,000 or

more. For example, there was no evidence in the contract file documenting

the Authority’s basis for awarding to Managing Total Performance a

$796,600 contract for phase I management reform work or adding $10.6

million in modifications to this contract. The contract file also contained

information that indicated that the Authority received several other

proposals but contained no documentation explaining why Managing Total

Performance was selected or the other proposals were not selected.

In addition, under simplified contracting, when written proposals are

received the evaluation panel is required to document the basis for its

initial recommendation for contract selection, including a brief description

of why the recommended proposal offers the best value of all proposals

received. The evaluation panel’s basis for its initial recommendation for

contract selection was not documented in the contract files for the four

contracts where simplified contracting procedures applied. For example,

the Authority awarded a $54,000 contract which was later modified to

$94,500 to the Gaebler Group to establish a management task force to

provide management and technical assistance to its former CMO. The

Authority’s contract file contained six proposals in response to the

solicitation, but there was no evidence in the contract file documenting the

Authority’s basis for selecting the Gaebler Group. There also was no

evidence in the contract file that the other five firms were not qualified or

Basis for Contract Selection

Generally Not Documented
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were less qualified to provide the required services. In addition, the

Authority’ s technical evaluation panel and its former CMO both initially

recommended another contractor.

The other cases involve the three contracts the Authority awarded to

Thompson, Cobb, Bazilio and Associates totaling over $153,000 to audit its

financial statements and the enrollment in the District’s public schools.

However, the Authority did not document its basis for selecting this

particular contractor for any of the three contracts. The absence of a

clearly documented selection process left no written record to review the

basis for contract selection for the contracts we assessed or to determine

whether the awards were made at the lowest cost or best value and

whether offerors were treated fairly.

In response to our request for the basis for contract selections for the

contracts we reviewed, with respect to the former CMO contracts, the

Authority’s former Executive Director said that the proposals submitted

were evaluated by the selection committee. However, the final decisions

concerning contract awards to vendors, the acceptability of individuals

proposed as members of the team, and the tasks to which teams and

individuals were assigned were made by the former CMO. In addition, the

former Executive Director specifically acknowledged that the Gaebler

Group was not the recommendation of the selection committee and said

that the former CMO determined that she needed additional management

assistance and believed that the Gaebler Group could perform the tasks

within the time constraints. There was nothing in the contract file to

explain the former CMO’s position.

The former Executive Director also said that he determined that it was in

the Authority’s best interest to approve the $10.6 million in modifications

to the Managing Total Performance contract, even though the total price of

the modifications was greater than the original contract price, because the

Authority and District agencies had already fallen behind in implementing

management reform. Finally, the former Executive Director said that he

awarded the three contracts to Thompson, Cobb, Bazilio and Associates

based on recommendations from the Authority’s contracting staff and his

personal knowledge and experience with the firm.

In commenting on a draft of this report, the Authority said that the basis

for contract selection for the contracts awarded to the Gaebler Group,

Management Partners, the Urban Center, and Managing Total Performance

is contained in memorandums dated March 18, 1998, and September 4,

1997. However, these documents do not contain the Executive Director’s
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basis for contractor selection. In addition, the contract files contained no

explanation of the difference between the evaluation panel’s

recommendation and the selection of the Gaebler Group as previously

discussed.

The Authority commented that the Executive Director’s signature on the

contract as the contracting officer constitutes documentation for the basis

for contract selection. The Authority also believes that the award of a

contract in accordance with the recommendation of the selection team is

an adoption of that recommendation and is thus the basis for contract

selection. We agree in cases of simplified contracting where the Executive

Director accepts the panel’s recommendation that the Executive Director’s

signature on the contract constitutes documentation of the basis for

contract selection, as asserted by the Authority. However, according to

the Authority’s regulations, specifically chapter 5, section F.1., the

Executive Director is required to prepare a memorandum detailing the

procurement and the rationale for the contract selection for contracts over

$500,000. Therefore, under these formal contracting procedures, the

Executive Director’s signature on the contract would not satisfy this

regulatory requirement.

We found that the Authority did not comply with its regulations when it

awarded one sole source contract and executed a series of “modifications”

to another contract that became, in effect, a sole source award. The

Authority’s regulations require that all sole source contracts be

accompanied by a written justification and, if the contract exceeds

$100,000 on an annual basis, be approved by the Authority’s Chair.

However, we found that the Deputy Management Officer for the

Authority’s former CMO entered into a verbal agreement on a

noncompetitive basis without written justification or the Authority Chair’s

approval. The contractor, Boulware, was to provide executive recruitment

services for six senior-level management positions that were already

included in the scope of work for another contract. Authority officials said

that the verbal agreement was an unauthorized procurement but later

ratified the agreement and awarded a $105,000 sole source contract to

Boulware.

According to the written justification that was prepared 3 months after the

verbal agreement, the Authority’s basis for the sole source award was

twofold. First, the original contractor was not performing in accordance

with the terms of the contract; however, we found nothing in the original

contractor’s file to substantiate this assertion. Second, as stated in the

justification the selected firm was the only firm with the requisite

Justification for Sole Source

Contracts Not Always

Substantiated
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knowledge and skills to perform the required services; however, this

assertion was also not substantiated by any documents in the contract

files. To the contrary, documentation in the Boulware contract file

suggests that Boulware’s original proposal to perform similar services was

initially rejected by the Authority because it contained the highest hourly

rate among the five proposals received in response to another solicitation,

according to Authority officials. In addition, there was nothing in the

contract files that indicated that the other firms were not qualified or were

less qualified to perform the required services.

It should also be noted that our review of the Authority’s justification for

the noncompetitive procurement to Boulware determined that, the

contract files contained conflicting information. The Authority’s April 24,

1998, justification for awarding a sole source contract to Boulware to

provide search and recruitment services for six positions stated that the

current contractor, PAR Group, working for the Authority in the area of

executive recruitment, had been unable to deliver candidates within the

desired time frame, which affected the CMO’s office and other District

agencies. The justification further stated that, as a result of PAR Group’s

poor performance, it was necessary to enter into a contract with a firm

that had a track record for performance in the area of executive

recruitment. However, also in the PAR Group contract files was another

Authority justification dated the same day—April 24, 1998—for

noncompetitive procurement of a proposed modification to expand the

PAR Group’s search and recruitment activities to include six additional

positions. The justification stated that the PAR Group was doing an

excellent job in a cost-effective and timely manner. Further, the

justification said that, under these circumstances, it was considered

unlikely that another contractor, unfamiliar with the proposed work,

would perform the required tasks as cost effectively or in as timely a

manner as the PAR Group had done. According to the Authority, the

conflicting dates on the memorandums were the result of a typographical

error.

In reference to the two sole source justifications for the PAR Group and

Boulware, the Authority commented that a comparison of the two

justifications is initially confusing and said that the date of the Boulware

sole source justification is incorrect and is a typographical error. We agree

that the two sole source justifications are confusing and brought this to the

Authority’s attention on several occasions during our review. However, the

Authority did not provide us with a definitive response until we received

its written comments on the draft. We revised our report to reflect the

Authority’s comments.
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Notwithstanding the Authority’s explanation of the dates, our point is that

the sole source justification for Boulware was based in part on the

Authority’s statement that the PAR Group was performing poorly.

However, nothing in the PAR Group contract file showed that PAR Group

was performing poorly as asserted in the sole source justification. Further,

there is nothing in the contract file to support the former Executive

Director’s assertion that the Authority’s Board had imposed very tight 30-

day schedules for filling certain positions. Additionally, the PAR Group

contract did not contain any evidence of the cited 30-day schedule for

filling the positions.

In another contract, the Authority did not substantiate the award of sole

source contracts to Managing Total Performance. On September 4, 1997,

the Authority awarded a $796,600 management reform contract to

Managing Total Performance with a base term of 90 days. This contract

also provided for an option and further provided that, if the option were

exercised, the option term of the contract was from December 1, 1997,

through December 1, 1998. Authority officials confirmed that this

modification was not exercised by December 4, 1997, when the contract

expired.

When a contract has expired, the contractual relationship that existed is

terminated and that the issuance of a modification after the expiration

date, in effect, would be the award of a new sole source contract.8

However, the Authority did not treat this award as a new sole source

contract or justify it in writing, and there was no evidence of approval by

the Authority’s Chair in the contract file, as required by the Authority’s

regulations. Further, according to Authority officials, the District’s CPO,

who signed the modification that purported to exercise the option, was

authorized to prepare the proposed modifications for the Authority.

However, Authority officials said that they did not intend for the District’s

CPO to execute modifications without the Authority’s approval because

the contract was an Authority contract.

In explaining this situation to us on June 17, 1999, Authority officials said

that the Managing Total Performance contract was similar to several other

management reform contracts awarded by the Authority. These contracts,

they said, were intended to have two phases—development of proposed

reforms and the implementation of proposals accepted by the Authority;

however, events did not turn out entirely as planned. They said that phase I

resulted in many more proposals than could be funded. Consequently, the

 

8

 65 Comp. Gen. 25 (1985); 85-2 C.P.D. ¶ 435.
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Authority had to analyze them and decide which ones to approve. At the

same time, Authority officials said that they were under a lot of pressure

from Congress and others to move more quickly toward producing results.

Accordingly, they asked the District’s CPO to perform the administrative

tasks necessary to modify the contracts to proceed with the

implementation phase. However, while these actions were under way,

Authority officials said the Managing Total Performance contract expired.

Finally, Authority officials said that they did not realize that the District

had not done or documented cost/price analysis or negotiations for

modifications 1 through 14 of the Managing Total Performance contract.

In written comments on a draft of this report, the Authority questioned our

conclusion that it failed to “substantiate the award of sole source contracts

to Managing Total Performance.” As recognized by the Authority, this

conclusion was based on our view that the initial Managing Total

Performance contract, awarded on September 4, 1997, with an option

clause, had expired before the option was exercised. We concluded that

since the contract had expired, the issuance of a modification exercising

the option after expiration, was in effect the award of a new sole source

contract that should have been justified in writing and approved by the

Authority’s Chair. The Authority stated that it does not interpret the

Managing Total Performance contract as having expired. It further stated

that for a variety of reasons, the Authority and Managing Total

Performance “understood and agreed” that the contract would remain in

effect beyond the stated term in order to allow for the future exercise of

options for implementation work. The Authority further stated that it, not

GAO, is “the most appropriate interpreter” of what its contracts provide

and noted, as we did in the report, that the Authority is exempt from

District and federal procurement law.

We do not agree with the Authority’s position. The Authority suggests,

without actually stating so, that the Authority and Managing Total

Performance had an oral agreement to extend the contract beyond its

stated term. However, we found no evidence or documentation in the

contract file to suggest when the Authority and Managing Total

Performance might have reached this agreement to extend the contract or

to show that such an understanding and agreement existed. The letter

from the Executive Director to the District’s CPO, dated months after the

contract had expired, authorizing him to process modifications for the

Managing Total Performance contract and the subsequently issued

modifications contain no reference to a prior extension of the contract by

oral agreement. In essence, the Authority has asked us to accept that the
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contract had been extended, not based on any additional documentation,

but rather on its current explanations of its past intentions.

The Comptroller General decision we refer to in the report is cited for the

proposition that, as a matter of general contract law, not federal or District

procurement law, the attempt to exercise an option on an expired contract

can only be viewed as the execution of a new contract. When a contract

expires, an unexercised option provision that was part of the contract

would expire as well. The Authority’s view— that, despite the lack of

evidence in the contract file, we should not question its statement that the

contract was extended— highlights the problems caused by the Authority’s

failure to document key contract actions. If these actions are not

documented, there is no way for the Authority, or any organization

reviewing its actions, to know whether it followed its own regulations and

the provisions of its own contracts. Also, the lack of adequate

documentation makes it difficult to hold the Authority or its employees

accountable for their actions.

Of the nine contracts we assessed, the Authority’s former Executive

Director said it conducted contract negotiations for 2 of the 3 contracts

awarded under the formal contracting procedures which require the

documentation of negotiations whenever they occur. However, there was

no documentation of negotiations in the contract files for the contracts

awarded to Management Partners and the Urban Center for $513,000 and

$562,800, respectively. Based on the Authority’s regulations, these 2

contracts should have been awarded using the formal contracting

procedures because they were for $500,000 or more.

In another case, the Authority executed 14 modifications totaling $10.6

million to an expired contract with Managing Total Performance, which, in

effect, constituted a sole source award. Since the Authority erroneously

viewed these actions as modifications to an existing contract, the contract

files contained no documentation of negotiations, cost/price analysis, or

other steps that may have been taken to determine best value or least cost

or would be required for the award of a new contract. While the

Authority’s regulations state that the Authority is to provide goods and

services at the least cost or representing the best value for the Authority,

the regulations do not specify how to accomplish these objectives when it

executes contract modifications.

In addition, although the regulations do not require negotiations or

documentation of negotiations whenever they occur for contracts under

$100,000, the former Executive Director said that the Authority conducted

Inadequate Documentation

of Contract Negotiations,

Cost/Price Analysis, or

Independent Cost Estimates
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negotiations with qualified offerors for four of the remaining six contracts

we assessed. However, evidence in the contract files indicated that

negotiations occurred for only one of the four contracts for which the

Authority said it conducted negotiations. This was a contract with

Boulware for which a contract approval form stated that the Authority’s

Chief Financial Officer negotiated down Boulware’s proposed rates and

terms of the contract to the extent possible. However, the contract files

did not contain a record of the negotiation process, and the contractor told

us that negotiations did not take place and that the Authority’s Chief

Financial Officer dictated the price.

In its comments, the Authority said that it believes that the dictation of a

maximum price is included in the definition of negotiations. While we

agree, our purpose was to describe the nature of the negotiation and to

point out that the documentation in the contract file did not describe the

nature of the negotiation that took place or the Authority’s rationale for

arriving at the dictated price. Nonetheless, we recognize that the

contractor could have said that the price was too low and then attempted

to negotiate or simply declined the contract.

While the Authority’s regulations do not require independent cost

estimates for all of its contracts, the regulations do authorize the Authority

to develop its own cost/price estimate to help assess the reasonableness of

contractor proposals. For example, the regulations state that, when fair

and adequate price competition is obtained, a comparison among

proposed prices and to the Authority’s estimates is generally adequate to

verify that the prices offered are reasonable. The contract files for two of

the three contracts we assessed where the former Executive Director said

price comparisons were performed did not contain documentation of these

comparisons to show how the Authority determined price/cost

reasonableness.

DSIC also reported that contract negotiations were generally not

documented for several of the contracts it reviewed and that cost/price

analyses were frequently not documented. DSIC also found little evidence

that the Authority prepared or used independent cost estimates for several

contracts and pointed out that the number of hours proposed by some

offerors, within the competitive range, differed by as much as 50 percent.

According to DSIC, the absence of an independent cost estimate makes it

difficult to reconcile differences of such magnitude. DSIC recommended

that the Authority develop independent cost estimates of the hours needed

to perform required services to use as a basis for evaluating technical

proposals and costs.
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In his May 21, 1999, letter, the Authority’s former Executive Director said

that the Authority’s staff obtained and evaluated cost and pricing

information and that, after negotiations by the staff, he determined that the

prices were fair and reasonable for 9 of the 10 contracts we reviewed.

However, he did not provide any additional documentation or other

evidence of actual negotiations or cost/price evaluations.

In commenting on a draft of this report, the Authority said that contract

negotiations, a cost/price analysis, or an independent cost estimate are not

mandatory for all of the contracts we assessed. Although we did not say

that these were mandatory for all the contracts we assessed, we further

clarified our report in this regard. However, our point continues to be that

we did not see any documentation of negotiations the Authority said

occurred. We believe that contract negotiations, cost/price analyses, and

an independent cost estimate are important tools for ensuring best value

and fair and reasonable prices and thus represent good contracting

practices.

The Authority also commented that the provision for cost/price analysis in

its regulations does not require that cost/price analysis be documented in

the contract file. In addition, the Authority said that most of its contracts

reviewed by GAO are competitive and that documentation for the

cost/price analysis is contained in the cost proposal submitted by offerors.

We agree that the Authority’s regulations do not specifically require that

the cost/price analysis be documented in the contract file, and our report

does not state that it is a requirement. We also agree with the comment

regarding competitive contracts; however, we question the Authority’s

assertion that an offeror’s price proposal constitutes a cost/price analysis

by the Authority.

The District’s CPO did not comply with the Authority’s or the District’s

procurement regulations when he entered into an emergency sole source

contract totaling $153,800 and when he awarded a subsequent contract for

$893,000 as an emergency sole source contract without justifying the

emergency procurement or obtaining approval from the Authority. Both of

these contracts were to Smart Management Services to provide

management reform services to the Authority’s former CMO.

Concerning the first contract, according to the District’s CPO, in February

1998, he received an oral procurement request from the Authority’s former

CMO to obtain consulting services to assist her with reconciling the

District’s fiscal year 1998 budget and management reform anomalies.

According to the District’s CPO, the former CMO provided him with the

District’s CPO Did Not

Comply With Authority

or District

Procurement

Regulations
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names of five or six firms that she considered qualified to perform the

tasks and said that she needed a firm that could start to work immediately.

The District’s CPO said that he phoned the firms on the list and that only

one firm–Smart Management Services—was available to start to work

immediately. However, he did not maintain a record of his telephone

conversations with the firms. He said that a list of the firms was not

retained because the initial contract was processed as a sole source

procurement. Shortly thereafter, the District’s CPO entered into an

emergency sole source contract totaling $153,800 with Smart Management

Services without either justifying how the procurement met the terms of

an emergency procurement, as the District’s procurement regulations

require, or obtaining the Authority’s approval. The Authority’s review and

approval regulations for District contracts require that all sole source

contracts and modifications issued under the direction of the District’s

CPO be submitted to the Authority for review and approval prior to award.

In addition, the District’s CPO did not comply with District procurement

regulations when he modified the purchase order agreement three times to

increase the scope of services and costs. The District’s procurement

regulations state that contracts done on an emergency basis are not to be

modified to expand the scope or extend the time of the procurement

unless a limited number of additional services are needed to satisfy an

ongoing emergency requirement.

The contract file for the second contract, which was also awarded to

Smart Management Services 4 months after the first emergency sole

source contract, did not contain evidence that the District’s CPO justified

how the procurement met the terms of an emergency procurement as the

regulations require or submitted the $893,000 emergency sole source

contract to the Authority for review and approval. The contract required

Smart Management Services to provide consultant services to the

Authority’s former CMO for a 1-year period. The Authority’s review and

approval regulations for District contracts specifically require that sole

source contracts and contracts for consultant services issued by or under

the direction of the CPO be submitted to the Authority for review prior to

award. The District’s regulations define an emergency procurement as one

responding to a situation, such as a flood, epidemic, riot, or other reason

set forth in a proclamation by the Mayor, that creates an immediate threat

to the public, health, welfare, or safety of its citizens. Moreover, under the

District’s procurement regulations, an emergency procurement is limited

to not more than 120 days, and the contracting officer is required to initiate

a separate nonemergency procurement if a long-term requirement for

services is anticipated.
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In comments on a draft of this report, the District’s CPO said that the draft

report incorrectly links the term “emergency” to the regulatory context of

fire, flood, or endangerment to public health when no such context was

cited or intended and said that the justification was clearly stated in

writing. We disagree and believe that the District’s procurement

regulations, which were used by the District’s CPO as the basis for

justifying the emergency sole source contract, are specific on what

constitutes an “emergency” procurement as stated in our report. In

addition, our draft report states that the written justification did not

explain how the procurement met the terms of an emergency procurement

as required by the District’s regulations.

According to the District’s CPO, he was advised by his General Counsel,

after consulting with the Authority’s Deputy General Counsel and Chief

Financial Officer, that the contract did not have to be submitted to the

Authority for approval because the contract, which obligated

approximately $330,000 during fiscal year 1998, was less than the $500,000

threshold specified in the Authority’s February 26, 1998, resolution, which

requires District contracts in excess of $500,000 to be submitted for review

and approval. We believe that, based on Section 4.1.E of the Authority’s

review and approval regulations governing District contracts, the District’s

CPO was required to submit this contract to the Authority for its review

and approval. Section 4.1.E states that all proposed sole source contracts

awarded by the CPO must be submitted to the Authority prior to award.

In commenting on our finding that the Smart Management Services

contract for $893,000 should have been submitted to the Authority for

review and approval, the District’s CPO commented that the value of the

contract was less than the $500,000 approval threshold prevailing at the

time and therefore did not require Authority review and approval. This is

not consistent with our understanding of the regulations or the value of the

contract. As our report states, our basis for concluding that the District’s

CPO was required to submit this sole source contract to the Authority for

review and approval is Section 4.1.E of the Authority’s review and approval

regulations for District contracts.

In August 1998, the Authority terminated this contract because it believed

that the contract contained several deficiencies. In particular, the

Authority stated that the contract was awarded on a sole source basis and

that under federal statutes and Authority resolutions, the Authority should

have approved it. The Authority also said that it appears that the principal

consultant who performed the main task under the contract was

designated as a Deputy Management Officer reporting directly to the CMO
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Page 21 GAO/GGD-99-134 Procurement Practices

and spent most of her time in a staff function. Thus, the Authority

concluded that the compensation terms for the principal consultant and

the two additional senior consultants were in excess of the levels that

could be paid and justified for even the most senior positions in the

District government.

This same contract was also the source of an investigation by the District’s

Office of Inspector General at the request of the Authority. The Inspector

General issued a report on the results of the investigation and concluded

that the District’s CPO was required to submit the $893,000 emergency sole

source contract to the Authority for approval, but failed to do so, and also

improperly awarded the contract as an emergency procurement. With

regard to the submission of the contract to the Authority for review and

approval, the Inspector General considered the Authority’s February 26,

1998, resolution to be clear on what type of contracts are required to be

submitted to the Authority for review and approval, and we agree.

Further, the Inspector General said that the District’s procurement

regulations have their own very strict definition of an emergency. For

example, an emergency includes such conditions as a flood, epidemic, riot,

or other reason set forth in a proclamation by the Mayor. As such, the

Inspector General concluded that the CPO acted outside the scope of the

District’s procurement regulations when he awarded the $893,000 contract

as an emergency sole source contract because the situation did not

constitute an emergency as prescribed in the regulations. However,

because the Authority subsequently terminated the contract in August

1998, the Inspector General did not recommend any further action and

deferred the issue to the Mayor for final disposition.

Contract administration constitutes an integral part of the procurement

process that ensures that the government gets what it paid for. It involves

those activities that are performed after a contract has been awarded to

determine how well the contractor performed with regard to meeting the

requirements of the contract. The Authority’s procurement regulations do

not contain detailed provisions on contract administration. The regulations

state that the Authority plans to monitor contractor performance and

certify satisfactory performance prior to payment of any contractor

invoice.

We saw little or no evidence of how the Authority monitored or certified

satisfactory contractor performance for the nine contracts we assessed.

According to Authority officials, they relied on the contractor’s work

statements to monitor the contractor’s performance. However, we found

Weaknesses in the

Authority’s Contract

Administration
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that the statements of work for these nine contracts generally did not

contain thorough descriptions of the required services, expected results,

and standards for measuring the contractor’s performance and

effectiveness as required by the Authority’s procurement regulations. For

example, we found that three separate firms had contracts with the same

statements of work that required them to “develop and execute strategies

for implementing existing management reform and improvement projects

and work with, and within agencies to develop an overall operational

improvement strategy.” Additionally, the work statements for these three

contracts did not have standards for measuring the contractor’s

performance as required by the Authority’s regulations. The development

of statements of work is important because they provide a basis for

monitoring the contractor’s performance to ensure that the contractor has

performed satisfactorily and delivered the required goods and services

before payment of invoices.

Equally important, for the nine Authority contracts we assessed, the

Authority contracted and paid for goods and services totaling $13 million;

yet, there was no evidence in the contract files that it received the required

deliverables for three of the nine contracts. The Authority’s contract files

contained evidence indicating that it received the required deliverables for

four contracts. For two of the five contracts where there was no evidence

in the contract files, we relied on the documentation maintained by two of

the three contractors we visited to determine whether the contractor

provided the required deliverables. Those two contractors provided us

with copies of their required deliverables that indicated that they met the

terms of their contracts. Although the contract files for the other three

contracts contained invoices, there was no evidence that they were always

reviewed and approved and did not contain statements that the

contractor’s performance was satisfactory, thus making it difficult to

determine whether the deliverables were received for these three

contracts.

In commenting on a draft of our report, the Authority said that our finding

that it lacked a system for contract administration is incorrect and that it

has a definitive system that is understood by its staff. While the Authority

acknowledges, as our report states, that its procurement regulations

contain few provisions concerning contract administration, it did not

provide any evidence to support its statement that it has a definitive

contract administration system that is understood by its procurement staff.

The Authority further states that under its system, staff are expected to

keep the Executive Director and contracting staff informed of any

changes, significant problems, and the general status of contract work.
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This system was not documented in the contract files. To the contrary, we

found that, with respect to the Boulware contract, Authority staff entered

into a verbal agreement without the Authority’s knowledge.

 In reference to our statement that we found little evidence of how the

Authority monitored or certified satisfactory contractor performance for

the nine contracts we assessed, the Authority commented that it has

always interpreted the requirement for certification of satisfactory

performance in its regulations to mean approval by cognizant Authority

personnel of contractor invoices submitted for payment. The Authority

also said that all contractor invoices must be reviewed and approved by

the cognizant staff member. We agree that contractors’ invoices should be

reviewed and approved by appropriate Authority staff prior to payment.

However, we also believe that the signing of an invoice authorizing

payment does not constitute certification of satisfactory performance as

described by the Authority’s regulations.

In addition, we noted that there were several invoices stamped paid with

no apparent signature authorizing payment. For example, the Authority

payment records provided to us for the Urban Center contract included

copies of five checks and invoices paid to the contractor totaling $514,325.

For two of the five payment records, where the invoices totaled $140,350,

there was no indication on the invoices that they had been reviewed or

approved. Two other checks, totaling $250,075, had no invoices to support

the amount of or purpose for the payment. We noted that the file contained

a document stating that the contract was terminated due to “possible

fraudulent invoices.” This document was dated subsequent to the paid

dates of the checks and invoices cited above. In another example, the

contract file contained a payment record of an invoice for the Gaebler

Group in the amount of $18,073. We noted, however, that the invoice

contained in the contract file was not annotated to show that the Authority

reviewed the invoice and there was no signature approving it for payment.

The Authority also disagreed with our finding that the statements of work

for the nine contracts we assessed did not contain thorough descriptions

of the required service, expected results, and standards for measuring the

contractor’s performance and effectiveness. As our report clearly states,

the Authority’s regulations require that statements of work contain

thorough descriptions of the required services, expected results, and

standards for measuring the contractor’s performance and effectiveness.

The statements of work for the nine contracts we assessed did not contain

such information. The Authority further commented that with regard to

the former CMO contracts, performance type statements of work were not
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feasible and that the management task force contracts, in essence,

provided a group of personnel with municipal management experience to

act as the newly appointed staff of the former CMO. We believe that the

situation the Authority described is similar to a personnel situation and do

not believe that performance expectations would have been unreasonable.

The Authority commented that, contrary to the statement in the draft

report that invoices in the contract files for the Gaebler Group,

Management Partners, and the Urban Center were not always reviewed

and approved, no invoice was ever paid without approval. We do not state

that invoices were paid without approval. We state that there was no

evidence in the contract files that invoices provided by the Authority were

always reviewed and approved. We did, as previously pointed out, find

instances of invoices stamped paid without annotation of approval or

written certification of satisfactory contractor performance.

Finally, in reference to our statement that there was no evidence in the

contract files that the Authority received the required deliverables for

three of the nine contracts we assessed, the Authority commented that it

has never been the Authority’s practice to require that copies of

deliverables and invoices be kept in the contract files. We do not state that

copies of deliverables should be maintained in the contract files. However,

we believe that a document in the file certifying that the contractor met the

terms of the contract and provided the required deliverables is a good

procurement practice. The Authority further stated that most of its

contracts provide that payment be made after satisfactory delivery of

specified deliverables and that it has never made such a payment without

receipt of satisfactory work. Our report does not state that the Authority

made payments without receipt of satisfactory work. We state that, based

on our review of the contract files, there was no evidence in three of the

nine contract files we assessed that the Authority received the required

deliverables and that we were able to find evidence indicating that the

Authority received the deliverables for the other six contracts.

We found no documentation in the contract files that the District’s CPO

monitored the contractor’s performance or received required deliverables

for the two contracts that he awarded. The District’s procurement

regulations state that it is the responsibility of the contracting officer to

ensure that the contractor performs in accordance with the terms of the

contract before payment of any contractor invoice. In addition, as stated

previously, the Authority transferred the Managing Total Performance

contract to the District’s CPO for administration. District officials told us

that they have an individual who is responsible for monitoring the

Evidence That the

District’s CPO

Monitored Contractor’s

Performance Was Not

Available
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Page 25 GAO/GGD-99-134 Procurement Practices

contractor’s performance to ensure that the terms of the contract are met

before payment of invoices. However, there was no evidence in the

contract file to substantiate this assertion.

In commenting on a draft of this report, the District’s CPO said that the

draft report incorrectly states that contract administration was the

responsibility of the District’s Office of Contracting and Procurement. As

our report states, according to the District’s procurement regulations, it is

the responsibility of the contracting officer to ensure that the contractor

performs in accordance with the terms of the contract before payment of

any contractor invoice.

Several factors appear to have contributed to the Authority’s contracting

problems. The Authority’s former Executive Director attributes the

contracting problems to the short period in which the Authority had to

carry out its “massive and formidable” tasks. We do not believe that the

existence of statutory timeframes should exempt the Authority from fully

complying with its procurement regulations.

In its January 1999 report, DSIC, which reviewed over 100 Authority

contracts awarded between August 1995 and September 1998, said that the

Authority generally followed its streamlined procurement regulations.

However, DSIC also identified some of the same problems we did. DSIC

attributes the Authority’s contracting problems, in part, to the Authority’s

emphasis on achieving its programmatic mission in a short time period and

its lack of procurement expertise. DSIC also identified such problems as

no independent cost estimates, no documentation of actual analysis of the

Authority’s declaration of fair and reasonable price for modifications and

sole source contracts, inadequate training for contracting staff, and lack of

documentation in the contract files.

In its written comments on a draft of this report, the Authority points out

that DSIC, the consultant firm retained by the Authority, concluded in its

report that the Authority generally followed its procurement regulations.

We acknowledge this in our report. However, we believe that it is equally

important to point out that, although DSIC’s report contained many

examples of the problems it found with the Authority’s procurement

practices, the report did not explain the basis for the statement that the

Authority generally followed its streamlined procurement for all the

contracts reviewed. The report was unclear as to whether this conclusion

applied to all of the 109 contracts or some portion of the contracts. In

addition, DSIC officials were not able to provide any documentation to

support this statement.

Factors Contributing

To Procurement

Problems
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DSIC made several recommendations to the Authority to address the

problems it identified and said in its January 1999 report that the Authority

had begun to act on them. In a January 13, 1999, letter to DSIC, the

Authority stated that it

• would begin developing cost estimates of the hours needed to perform

required services,

• had assigned a procurement specialist to maintain its contractor files and

use a standardized contract file folder and checklist to maintain

accountability,

• had established an informal 3 week minimum response time for all its

solicitations to encourage competition resulting in lower costs, and

• would continue to make resources available to incorporate education and

training for all staff involved in its contracting activities.

We believe that, if effectively implemented, the actions the Authority says

it has taken and plans to take should help correct some of the problems

that both DSIC and we identified.

 In addition, we believe other factors that were not addressed by DSIC’s

recommendations may have contributed to the failure of Authority staff to

follow the procurement regulations. First, while the Authority’s Executive

Director delegated contracting responsibilities to various members of the

Authority’s staff, he had not fully defined areas of responsibility and

accountability among the contracting staff. For example, while the

Authority’s former Executive Director signed the contracts as the

Contracting Officer, it was not always apparent who was responsible for

ensuring that key contract award and administration decisions were

documented and maintained in the contract files.

In its comments on a draft of our report, the Authority disagreed with our

statement that its Executive Director had not fully defined the areas of

responsibility and accountability among the contracting staff and that it

was not always apparent who was responsible for ensuring that key

contract award and administration decisions were documented and

maintained in the contract files. The Authority said that members of its

professional staff have always been fully aware of their contracting

responsibilities. Our report points out that there was no documentation in

the contract files to show who was responsible for contract

administration, and the Authority did not provide any additional

information with its written comments.
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Second, the Authority had not provided its contracting staff with guidance

on how to implement its procurement regulations to ensure compliance.

For example, the Authority’s regulations state that they are intended to

permit the Authority to award contracts based on least cost or best value,

and require that statements of work contain performance standards,

contractors’ performance be monitored, and certification be provided that

the contractor performed satisfactorily. However, the Authority had not

issued guidance to its contracting staff on how these requirements are to

be implemented to comply with the procurement regulations. Equally

important, the Authority had not provided its contracting staff with

guidance for awarding and administering those procurement actions not

specifically covered by its regulations, such as contracts over $100,000 and

below $500,000, or for executing contract modifications, or contract

options.

In its comments on a draft of this report, the Authority disagreed with our

statement that it had not provided its contracting staff with guidance on

how to implement its procurement regulations. Our report states that we

found no written guidance on how the Authority’s staff was to implement

its procurement regulations. In addition, when we asked the Authority for

supporting documentation, none was provided. DSIC also found this to be

a problem and recommended that the Authority improve its procurement

process by providing standardized procedures on how to implement its

procurement regulations.

Finally, the lack of specific requirements in the Authority’s procurement

regulations for all of its contracting activities appeared to have contributed

to the problems that we found with the Authority’s procurement practices.

For example, the regulations do not specify the procedures that should be

followed for awarding contracts between$100,000 and $500,000, and for

executing contract modifications and contract options. In addition, there

was no evidence in the contract files we reviewed that the Executive

Director determined the type of procurement method—that is simplified or

formal-- that should be applied to the contracting situations stated above.

Regarding the two contracts awarded by the District’s CPO without the

Authority’s approval, we did not determine whether the Authority had an

adequate mechanism for ensuring that these contracts are submitted to the

Authority for review and approval prior to award.

The Authority was established essentially to repair the District’s failing

financial condition and to improve the effectiveness of it’s various entities.

We recognize that, as the Authority has pointed out, it was a newly

Conclusions
B-281962

Page 28 GAO/GGD-99-134 Procurement Practices

established organization and was expected to accomplish the majority of

its tasks in a relatively short period of time, and thus had to award many

contracts quickly. However, we believe that it was also important for the

Authority to lead by example by better adhering to its own regulations,

ensuring accountability and integrity, and by not following the same type

of practices that it was established to correct in the District.

We also recognize that any new organization is bound to experience startup difficulties and take some time to operate effectively. However, the

majority of the Authority’s contract actions that we reviewed were

awarded almost 3 years after the Authority was established. We believe

that this was a sufficient amount of time after establishment to expect an

effective procurement operation that follows its own requirements and

provides assurance that the objectives of its requirements are met.

The actions that the Authority says it has taken or plans to take based on

DSIC’s report, if effectively implemented, should help correct some of the

problems both DSIC and we identified. However, we do not believe that

these actions are likely to fully resolve the problems we found. They do

not fully address findings that the Authority did not fully define the roles

and responsibilities of its procurement staff or provide guidance to its staff

on how to (1) determine best value; (2) develop performance standards for

work statements; (3) monitor contractors’ performance and certify

satisfactory performance; (4) document its basis for contractor selection

and justification for sole source awards; and (5) provide its contracting

staff with guidance for awarding and administering those procurement

actions not specifically covered by its regulations, such as contracts

between $100,000 and $500,000, and for executing contract modifications,

or contract options.

Perhaps even more importantly, we do not believe that the Executive

Director’s position on waiver of the Authority’s regulations, certifying

satisfactory performance, or extending and modifying an expired contract

reflect sound contracting principles. We believe that in accordance with

good procurement practices

• any waivers by the Executive Director of the Authority’s contract

regulations should be justified and in writing;

• the basis for contract award should be documented, particularly when the

selected source is different from the source recommended by the technical

evaluation panel;
B-281962

Page 29 GAO/GGD-99-134 Procurement Practices

• contract files should contain a written certification, signed by an

appropriate official, stating that the contractor’s performance was or was

not satisfactory; and

• all contract extensions should be in writing and cannot be modified or

extended.

We did not determine whether the Authority had processes or controls to

ensure that its review and approval regulations governing the submission

of District contracts were being followed. However, it was apparent that

the two contracts we reviewed that were awarded by the District’s CPO

were awarded without being reviewed and approved by the Authority as

required by the Authority’s regulations governing District contracts.

To improve its contracting operations, we recommend that the Chair of the

Authority

• require the Executive Director to (1) approve and justify all waivers of

Authority contracting regulations in writing, (2) only extend contracts in

writing and prohibit the Executive Director from extending or modifying

expired contracts, and (3) include in contract files a written certification,

signed by an appropriate official, stating that the contractor’s performance

was or was not satisfactory;

• direct the Executive Director to (1) fully define the roles and

responsibilities of the Authority’s procurement staff; (2) prepare a written

plan for contracting that includes methods for ensuring compliance with

the procurement regulations; (3) provide guidance to the procurement

staff on areas, such as determining best value, developing performance

standards for work statements, monitoring and certifying contractors’

performance, preparing written justifications for sole source awards,

documenting the basis for contract selection, awarding contracts that are

between $100,000 and $500,000, and executing contract modifications, or

contract options;

• hold the Executive Director and other procurement staff accountable for

ensuring that they follow the Authority’s procurement regulations; and

• require the Executive Director to assess whether the Authority’s processes

and controls for the review and approval of District contracts prior to

award are effective and, if not, make appropriate changes.

On July 21, 1999, the Authority’s Executive Director provided written

comments on a draft of this report that are reprinted in appendix III.

Although the Authority said it would seriously consider our proposed

recommendations and recognized that its procurement practices have not

been perfect, it expressed concern and disagreement with portions of the

Recommendations to

the Chair of the

Authority

Authority’s and District

CPO’s Comments and

Our Evaluation
B-281962

Page 30 GAO/GGD-99-134 Procurement Practices

draft that pertained to the contracts it awarded. The Authority did not

provide any additional documentation with its written comments.

The Authority said that the 10 contracts we reviewed were not a

representative sample and that 5 in particular were not typical of Authority

contracts in general. Our report does not suggest that the contracts we

reviewed were selected randomly. To the contrary, our report describes in

detail how we selected the contracts we reviewed, and discusses the

circumstances surrounding the award of the five contracts awarded on the

behalf of the CMO that the Authority says are not representative of how it

carries out its contracting function. Our report states that DSIC, the

Authority’s contractor, did identify some of the same problems we did but

we do not state that these problems are representative of all Authority

contracts.

The Authority also commented that the draft report assumed that its

regulations applied to all 10 of its contracts we reviewed. Our report does

not state that the Authority’s regulations for formal contracting apply to all

nine of the Authority’s contracts we assessed for compliance. However, we

agree that our report was not as clear as it could have been in this regard

and clarified our report to the extent we could, given that the Authority

had not specified what requirements applied to contracts between

$100,000 and $500,000 or for contract modifications or options.

Finally, the Authority disagreed with several of our interpretations and

application of its regulations, and believes that its procurement regulations

and how the Authority interprets or implements them are generally

adequate and appropriate in light of its situation. We continue to believe

that our interpretation and application of Authority regulations are

generally appropriate and that the manner in which the Authority has

applied its regulations and has conducted its contracting activities in some

instances is not consistent with sound contracting principles or practices.

In particular, we believe that the Authority’s views regarding waivers of its

regulations, certification of satisfactory contractor performance, and the

extension and modification of expired contracts may prevent the Authority

from meeting its contracting objectives and does not provide adequate

internal controls to prevent abuses from occurring. Another problem is

the lack of clarity as to what requirements apply to contracts between

$100,000 and $500,000.

The Authority’s comments on issues that it disagrees with us on and our

assessment of the Authority’s comments are discussed as appropriate in

the body of the report. We also made specific technical changes to clarify
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Page 31 GAO/GGD-99-134 Procurement Practices

our report based on suggestions by the Authority. Finally, we have made

additional recommendations to the Authority to address our concerns in

certain areas.

On July 12, 1999, the District’s CPO provided comments on a draft of this

report. He disagreed with our findings with respect to the contracts he

awarded. We believe that our findings are well documented and are

correct. His specific comments and our responses are discussed in the

appropriate sections of our report.

We are sending copies of this report to Senator Kay Bailey Hutchison,

Senator Richard J. Durbin, and to Representative James P. Moran and

Representative Eleanor Holmes Norton in their capacities as Chair or

Ranking Minority Member of Senate and House Subcommittees. We are

also sending copies to the Honorable Anthony A. Williams, Mayor, District

of Columbia; Ms. Alice Rivlin, Chair, District of Columbia Financial

Responsibility and Management Assistance Authority; and other interested

parties. Copies will also be made available to others upon request. GAO

contacts and staff acknowledgments are listed in appendix IV. If you have

any questions, please call me or Tammy R. Conquest on (202) 512-8387.

Bernard L. Ungar

Director, Government Business

 Operations Issues
Page 32 GAO/GGD-99-134 Procurement Practices

Contents

Letter 1

Appendix I

Summary of Contract

Terms for 12 Contracts

Included in Our

Review

34

Appendix II

Review of Thompson,

Cobb, Bazilio and

Associates Contract

(FY96/FRA#2)

36

Appendix III

Comments From the

Authority

37

Appendix IV

GAO Contacts and

Staff

Acknowledgments

44

Abbreviations

CMO Chief Management Officer

CPO Chief Procurement Officer

DSIC Digital Systems International Corporation
Page 33 GAO/GGD-99-134 Procurement Practices
Appendix I

Summary of Contract Terms for 12 Contracts

Included in Our Review

Page 34 GAO/GGD-99-134 Procurement Practices

Contract aContract

date

Contract

action

Contract type Purpose Dollar amountContract status

as of 8/99

Boulware

98-C-018

9/1/98 Sole source

award

Fixed fee Executive recruitment

service

$105,000In progress

PAR Group

98-C-007

 Mod. 1

3/9/98

4/ /98

Competitive

award

Fixed fee

Fixed fee

Executive recruitment

service

Executive recruitment

service

38,500

75,000

Closed

Closed

Managing Total

Performance

97-C-031Db

 Mod. 1-14

9/4/97

7/8/98 and

9/10/98

Competitive

award

Sole source

award

Fixed fee labor

hour

Fixed price

Management reform

Management reform

796,600

10,600,000

Closed

In progress

The Gaebler Group

98-C-003C

3/24/98 Competitive

award

Fixed unit price

labor hour

Establish a

management task

force

94,500 Closed

Management Partners

98-C-003B

3/24/98 Competitive

award

Fixed unit price

labor hour

Establish a

management task

force

517,000 Closed

The Urban

Center

98-C-003A

3/24/98 Competitive

award

Fixed unit price

labor hour

Establish a

management task

force

562,800 Terminated

Thompson, Cobb, Bazilio

and Associates:

 FY96/FRA #2

 FY96/FRA #2

 FY97/FRA #2

 97-C-047

10/18/95

1/3/97

3/3/97

12/1/97

Competitive

award

Option 1

Option 2

Option 3

Fixed price

Fixed price

Fixed price

Fixed price

Audit FY95 financial

statement

Audit FY96 financial

statement

Audit FY96 financial

statement

(Internal controls)

Audit FY 97 financial

statement

23,392

23,392

5,000

35,000

Closed

Closed

Closed

Closed

Thompson, Cobb, Bazilio

and Associates

98-C-001

3/4/98 Competitive

award

Fixed unit price

labor hour

Audit DCPS enrollment 97,500 Closed

Thompson, Cobb, Bazilio

and Associates

98-C-008

4/20/98 Sole source

award

Fixed price Prepare

financial/accounting

manual

20,900 Closed

Thompson, Cobb, Bazilio

and Associates

98-C-010

8/20/98 Competitive

award

Fixed fee Audit FY98 financial

statement

34,818 In progress
Appendix I

Summary of Contract Terms for 12 Contracts Included in Our Review

Page 35 GAO/GGD-99-134 Procurement Practices

Contract aContract

date

Contract

action

Contract type Purpose Dollar amountContract status

as of 8/99

Smart Management

Services

8052-AA-NS-4-JW

2/27/98 Sole source

award

Labor hour rate Consultant services 153,800 Closed

Smart Management

Services

8112-AA-NS-4-JW

6/15/98 Sole source

award

Firm fixed price Consultant services 893,416 Closed

a

With the exception of the 2 Smart Management Services contracts, which were awarded by the

District's CPO, the Authority awarded the other 10 contracts.

b

This contract expired on December 4, 1997, because the Authority did not exercise its option. In

addition, between July 8, 1998, and September 10, 1998, the District CPO, on behalf of the Authority,

modified the expired contract 14 times, thus, in effect, awarding new sole source contracts. The

modifications ranged in price from $39,460 to $5,250,000.

Source: Authority procurement files.
Appendix II

Review of Thompson, Cobb, Bazilio and

Associates Contract (FY96/FRA#2)

Page 36 GAO/GGD-99-134 Procurement Practices

As previously stated, 1 of the 10 contracts we reviewed was awarded

before the Authority’s regulations were adopted in March 1996. However,

the Authority did not provide us with any information on what regulations,

if any, it used to award this contract. This contract was awarded to

Thompson, Cobb, Bazilio and Associates on October 18, 1995, for $23,392.

Thompson, Cobb, Bazilio and Associates was contracted to audit the

Authority’s financial statements. The contract provided for a base period

and the option to renew the contract for two additional years. During our

review of the Thompson, Cobb, Bazilio and Associates contract, we found

that the basis for contractor selection was not documented in the contract

file, nor was there a copy of the request for proposal.

In response to our request for documentation on its basis for selecting

Thompson, Cobb, Bazilio and Associates, the Authority stated that this

contract was an open market solicitation, meaning that only those firms

that requested it were mailed a copy of the solicitation. In response to our

follow-up request, the Authority stated that Thompson, Cobb, Bazilio and

Associates submitted the only proposal received in response to the

advertised solicitation. The Authority also said that the Executive

Director’s decision to award this contract was based on the firm’s

technical and cost proposals, the recommendations of members of his staff

who handled the procurement, and his personal knowledge and

experience with the firm.

The Authority also exercised three options over the 2-year term of this

contract. Although the base contract required the Authority to negotiate

the terms and conditions of these options, the contract file did not contain

documentation that the Authority negotiated the terms and conditions for

two of the options exercised. In addition, the file did not show that the

Authority prepared a contract modification to exercise these two options.

A confirmation letter from the contractor was the only evidence in the

contract file that the Authority exercised the first two contract options.

However, for option 3, the contract file contained a follow-on contract

signed by the Authority that included the terms and conditions for this

option as required by the base contract.

Although we did not find evidence that the Authority monitored or

certified that the contractor performed satisfactorily, we noted that the

contract file contained evidence that the Authority received the required

deliverables for the base contract and the three options.
Appendix III

Comments From the Authority

Page 37 GAO/GGD-99-134 Procurement Practices

See p. 30.
Appendix IIII

Comments From the Authority

Page 38 GAO/GGD-99-134 Procurement Practices

See p. 30.

Now on pp. 10 - 12.

See pp. 1, 2, 12.

See pp. 5 - 6.

See p. 30.
Appendix IIII

Comments From the Authority

Page 39 GAO/GGD-99-134 Procurement Practices

See pp. 13 – 14.
Appendix IIII

Comments From the Authority

Page 40 GAO/GGD-99-134 Procurement Practices

See p. 17.

Now on p. 16.

See pp. 14 - 16.
Appendix IIII

Comments From the Authority

Page 41 GAO/GGD-99-134 Procurement Practices

See pp. 22 – 23.

See pp. 22 – 23.

See pp. 21 - 24.

See p. 17.
Appendix IIII

Comments From the Authority

Page 42 GAO/GGD-99-134 Procurement Practices

Now on. pp. 9, 25, 26.

Now on p. 6.

See p. 9.

Now on p. 3.

See p. 24.

See p. 24.

Now on p. 4.
Appendix IIII

Comments From the Authority

Page 43 GAO/GGD-99-134 Procurement Practices

See p. 27.

Now on pp. 26 - 27.
Appendix IV

GAO Contacts and Staff Acknowledgments

Page 44 GAO/GGD-99-134 Procurement Practices

Bernard L. Ungar (202) 512-8387

Tammy R. Conquest (202) 512-5234

In addition to those named above, Geraldine Beard, Alan Belkin, John

Brosnan, William Chatlos, Bruce Goddard, and Seth Taylor also made key

contributions to this report.

GAO Contacts

Acknowledgments
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