March 26, 2008 

MEMORANDUM TO: Luis A. Reyes 

 Executive Director for Operations 

FROM: Stephen D. Dingbaum /RA/ 

 Assistant Inspector General for Audits 

SUBJECT: MEMORANDUM REPORT: AUDIT OF NRC’S 

CONTRACT FOR ALTERNATIVE DISPUTE 

RESOLUTION SERVICES (OIG-08-A-08) 

As part of the Office of the Inspector General’s (OIG) audit of NRC’s enforcement 

program, auditors identified issues regarding an NRC contract for alternative 

dispute resolution (ADR) services that warrant your attention. Specifically, 

• The current contract needs to be modified or renegotiated 

o the contract’s billing requirements are inadequate, and 

o the statement of work is insufficient; 

• contract management needs improvement; and 

• the appearance of a conflict of interest exists. 

As a result, NRC lacks the ability to provide effective contract oversight, which 

reduces its ability to prevent procurement fraud and abuse. 

BACKGROUND

On September 27, 2006, NRC awarded a $334,400 fixed-price, sole-source 

contract to Cornell University (Cornell) to provide neutral services supporting the 

enforcement ADR program1

 for a 2-year period.2 ADR is a term that refers to a 

 

1

 See OIG-08-A-03, Audit of NRC’s Alternative Dispute Resolution Program, for a fuller 

discussion on the ADR program at NRC. 

2

 The contract has a provision in which it may be extended for three additional years. Including 

these additional years, the total cost of the contract could be $893,000. 
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

number of processes, such as mediation and facilitated dialogues, that can be 

used to assist parties in resolving disputes. ADR is a voluntary process that 

often involves the use of a skilled third party neutral.3 

PURPOSE

The objective of this audit was to determine if NRC’s contract for ADR services 

had the appropriate controls in place. 

RESULTS

While the contract with Cornell has been used for more than a year for a number 

of ADR cases, NRC does not have the ability to provide effective contract 

oversight. This is caused by deficiencies in the contract such as inadequate 

billing requirements and an insufficient statement of work. Furthermore, there is 

minimal contract management over the contract. Thus the agency’s ability to 

prevent procurement fraud and abuse is reduced. In addition, there is the 

appearance of a conflict of interest due to NRC’s project officer’s association with 

a Cornell workshop. 

Standards for Contracting 

The Federal Acquisition Regulation provides contracting guidance for services or 

goods needed by the Government. Standard fixed-price contracts do not require 

detailed invoicing terms; however, under certain other contract types, the 

contractor may be required to submit invoices once each month (or more) and 

the invoice should include labor categories and hours billed. The invoice should 

also include the contractor’s travel costs with the required supporting 

documentation.4

The statement of work is an essential piece of the contract. The requirements 

and definitive standards for measuring the contractor’s performance should be 

explicit in the statement of work. Regardless of the communication between 

NRC and the contractor as the work progresses, the parties must rely on the 

language in the statement of work as the final determinant of scope, 

responsibilities, and obligations. The statement of work should include an 

itemized list of reports, documentation, and other deliverables, together with a 

delivery schedule. 

 

3

 A “neutral” is an individual who, with respect to an issue in controversy, functions specifically to 

aid the parties in resolving the controversy. 

4

 Required documentation means that receipts are needed for any charges $75 or more. 
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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The project officer, an NRC employee designated by the office holding the 

contract, has certain contract administration functions. The project officer’s 

duties include monitoring the contractor’s performance closely to ensure the work 

is satisfactorily performed in a timely manner. The project officer is the primary 

point of contact with the contractor on all technical project matters and provides 

technical direction to the contractor, monitors costs, and inspects and accepts 

deliverables. 

NRC has an acquisition certification program required for individuals who will be 

involved in any phase of awarding and administering a commercial contract. 

Project officers must take the basic certification training, which includes the 

completion of five mandatory training module workshops. In addition, project 

officers are required to receive refresher training every 3 years to maintain their 

certification. 

Improvements Needed to ADR Contract 

NRC’s current contract needs to be modified or renegotiated because the billing 

requirements are inadequate and the statement of work is insufficient. 

Furthermore, contract management needs improvement. Due to other duties, 

the project officer told OIG that he does not have sufficient time available to 

perform rigorous contract management. Despite the need for NRC to improve its 

control and management over the contract, NRC’s project officer said that 

Cornell is good at furnishing its services, such as providing a roster of mediators 

and getting the parties to agree on a mediator to oversee the process. 

 Current Contract

NRC issued a fixed-price contract to Cornell to provide neutral services 

supporting the agency’s enforcement ADR program. However, NRC is not able 

to reasonably know the cost or performance details. Use of the ADR program is 

voluntary, and any participant may end the mediation at any time. As a result, 

the price per case can range from a little over $400.00 to almost $4,000.005

depending on how far the case proceeds through the process, how many days of 

mediation are required, and the travel costs. NRC estimates that Cornell will 

provide neutral services for 30 to 80 cases over the contract’s 2 year base 

period. 

 Contract Billing Requirements Inadequate

Under the current contract, there are limited billing instructions and no 

requirements for travel reimbursement or for billing frequency. NRC’s project 

officer noted that Cornell personnel are often confused by the contract--

particularly the billing instructions. For example, Cornell called NRC asking for 

full payment of the contract (approximately $334K). NRC had to explain that 

 

5

 Figures based on prices for the period 10/01/06-09/30/08. Prices are scheduled to increase for 

the period 10/01/08-09/30/11. 
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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Cornell only gets paid for work it actually performs. While NRC reimburses the 

mediators for their travel expenses, the project officer has not received any 

receipts for the travel costs nor do the billing instructions require Cornell to 

provide such documentation. As of December 31, 2007, Cornell had not 

submitted an invoice to NRC for any services it performed on the contract that 

was let September 27, 2006. Therefore, NRC had not been billed for services 

that Cornell performed for the last 15 months. 

Statement of Work Insufficient

Problems during contract performance are often traceable to the approach, 

terminology, and content of the statement of work. The statement of work for the 

Cornell contract includes eight tasks. However, the contractor is not required to 

contact NRC or provide any deliverables until task five, which is the mediation 

conclusion. During task five, the contractor is required to provide NRC with a 

copy of each completed case evaluation. If a case does not reach the mediation 

phase because a participant pulled out earlier, Cornell is not required to notify 

NRC. However, according to the project officer and representatives at Cornell, 

the contractor has been keeping NRC updated on its progress throughout the 

process even though Cornell is not required to do so by the statement of work. 

 Contract Management Needs Improvement

In accordance with the current contract, NRC’s project officer is required to issue 

delivery orders6 to Cornell before work can begin. NRC’s project officer provided 

OIG with copies of the delivery orders for 2007. With only one exception, Cornell 

began conducting its neutral services prior to the delivery order authorization. 

NRC issued the delivery orders from 1 day up to 94 days7

 after Cornell began 

work. See Figure 1 for more details. 

 

6 The Federal Acquisition Regulation defines delivery order as an order for supplies placed 

against an established contract or with Government sources.

 

7

 This represents 94 calendar days. Taking weekends and holidays into account, the delivery 

order was actually 66 work-days late. 
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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Figure 1: Delivery Orders for Cornell's Neutral Services 

Delivery 

Order # 

Delivery 

Order Date 

Work Start 

Date 

Days Work Started 

Prior to Delivery Order 

Authorization 

07-001A 01/16/07 01/08/07 8 

07-002A 01/18/07 01/16/07 2 

07-003A 02/12/07 02/06/07 6 

07-004A 02/26/07 02/20/07 6 

07-005A 03/12/07 03/08/07 4 

07-006A 03/23/07 03/13/07 10 

07-007A 04/16/07 04/04/07 12 

07-008A 05/04/07 05/02/07 2 

07-009A 05/04/07 04/19/07 15 

07-010A 05/17/07 05/17/07 0 

07-011A 08/10/07 05/08/07 94 

07-012A 08/10/07 07/18/07 23 

07-013A 08/10/07 07/24/07 17 

07-014A 08/10/07 07/19/07 22 

07-015A 08/10/07 07/18/07 23 

07-016A 08/10/07 07/20/07 21 

07-017A 08/10/07 07/23/07 18 

07-018A 08/10/07 07/25/07 16 

07-019A 08/10/07 07/25/07 16 

07-021A 08/31/07 08/21/07 10 

07-022A 10/11/07 10/10/07 1 

Average Number of Days Late: ~16 

Although Cornell proposed, as key personnel, a senior official at the University to 

serve as the contract manager with primary responsibility over the work 

performed, NRC’s project officer is aware that an administrative assistant is 

performing the duties instead. The contract manager’s responsibilities include 

directing and administering the mediation services; directing the program support 

work; managing the data analysis, evaluation and performance of services; and 

developing and maintaining a correspondence tracking system and maintaining 

all program files in accordance with the project requirements. Furthermore, in its 

proposal, Cornell stated that the contract manager would, in managing this 

program caseload, adhere to the following procedures: 

• Initial contact with potential parties to assist in determining whether 

they are interested in pursuing ADR. 

• Contact parties to confirm interest and document agreement to 

mediate. 

• Contact acceptable session neutral and conduct initial conflict of 

interest check. 

Yet, according to NRC’s project officer and representatives at Cornell, an 

administrative assistant is conducting most of the work in lieu of the contract 

manager. NRC’s project officer expressed concern that the contract manager is 

not available as much as NRC would like and that Cornell relies on the 

administrative assistant to carry out the work. However, this delegation of 

administrative functions is not prohibited by the current contract. 
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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Further, NRC project officers play a critical role in contract management and 

NRC’s acquisition certification program is key to their success. While the project 

officer for the ADR contract was certified under NRC’s program, that certification 

expired in November 2007. 

Reduced Contract Oversight 

NRC lacks the ability to provide contract oversight because the agency’s contract 

needs to be modified or renegotiated to correct inadequate billing procedures 

and the insufficient statement of work. Moreover, the project officer does not 

have the time to perform rigorous contract management duties, including taking 

the required acquisition recertification training. 

As a result, NRC has a reduced ability to prevent procurement fraud and abuse 

and may be paying more than needed for the ADR services. For example, 

although the travel expenses are currently low, NRC has no controls in place to 

validate these costs should they increase. Furthermore, an administrative 

assistant at Cornell is performing the work that should be performed by a more 

senior official per Cornell’s proposal. Such an issue can lead to cost mischarging. 

RECOMMENDATIONS

The Office of the Inspector General recommends that the Executive Director for 

Operations: 

1. Either modify or renegotiate the current contract to: 

A. Include explicit billing instructions that establish standards such as 

monthly billing requirements. 

B. Strengthen the statement of work to include specific deliverables and 

milestone dates. 

2. Require the project officer to be certified/recertified under NRC’s 

acquisition certification program. 

Standards for Avoiding Conflict of Interest

In accordance with Federal Acquisition Regulation, the Government shall 

conduct all contracting business in a manner above reproach. As such, the 

general rule is to strictly avoid any conflict of interest or even the appearance of a 

conflict of interest in Government-contractor relationships. Conflict of interest 

refers to a situation when someone, such as a public official, has competing 

professional or personal obligations that would make it difficult to fairly fulfill his or 

her duties. 
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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Conflict of Interest Perception 

NRC’s project officer for the ADR contract is listed as a Cornell faculty member 

for an ADR workshop sponsored by the University. Although the project officer 

taught a portion of the workshop, Cornell did not provide payment for the 

services. However, this close association gives the appearance of a conflict of 

interest in Government-contractor relationships. 

As such, the project officer should not be identified or participate as Cornell 

faculty because of the appearance of favoritism to the contractor. 

RECOMMENDATION

The Office of the Inspector General recommends that the Executive Director for 

Operations: 

3. Preclude the project officer for the ADR contract from participating as 

faculty in any future Cornell workshops. 

SUMMARY AND CONCLUSION

NRC needs to strengthen its ability to provide the needed contract oversight to 

prevent procurement fraud and abuse over its ADR contract. As such, the 

agency should review and reconsider the current contract with particular attention 

on the billing requirements and statement of work. NRC also needs to increase 

its contract management. In addition, NRC should take appropriate steps to 

ensure that there is not even the appearance of a conflict of interest due to the 

project officer’s association with NRC’s contractor for ADR services. 

CONSOLIDATED LIST OF RECOMMENDATIONS

1. Either modify or renegotiate the current contract to: 

A. Include explicit billing instructions that establish standards such as 

monthly billing requirements. 

B. Strengthen the statement of work to include specific deliverables and 

milestone dates. 

2. Require the project officer to be certified/recertified under NRC’s 

acquisition certification program. 

3. Preclude the project officer for the ADR contract from participating as 

faculty in any future Cornell workshops. 
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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SCOPE AND METHODOLOGY

To accomplish the audit’s objective, the OIG audit team reviewed the Federal 

Acquisition Regulation, NRC’s ADR policy, Management Directive 11.1, the ADR 

services contract, and other ADR-related documents. The audit team 

interviewed officials at Cornell University and NRC personnel in the Office of 

Enforcement and the Office of Administration. 

OIG conducted this audit between July 2007 and October 2007 in accordance 

with generally accepted Government auditing standards. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based 

on our audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our finding and conclusion based on our audit objective. 

The work was conducted by Sherri Miotla, Team Leader; Catherine Colleli, Audit 

Manager; Terri Cooper, Audit Manager; and James McGaughey, Senior Analyst. 

AGENCY COMMENTS

At an exit conference on January 25, 2008, NRC provided informal, written 

comments on the draft audit report. On January 30, 2008, and February 15, 

2008, OIG audit staff met with agency officials and further discussed the report. 

OIG incorporated the suggestions as appropriate and NRC provided additional 

informal, written comments. On March 4, 2008, OIG issued a formal draft report 

and on March 17, 2008, NRC provided formal written comments. OIG 

incorporated those comments, as appropriate, into the final report. See 

Appendix A for the agency’s comments in full and Appendix B for OIG’s detailed 

responses to the agency’s comments. 

Please provide information on actions taken or planned on the recommendation 

within 30 days of the date of this memorandum. Actions taken or planned are 

subject to OIG follow-up, as stated in the attached instructions. 
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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Appendix A 

AGENCY FORMAL COMMENTS
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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Appendix B 

DETAILED OIG RESPONSES TO AGENCY COMMENTS

At an exit conference on January 25, 2008, NRC provided informal, written 

comments on the draft audit report. On January 30, 2008, and February 15, 

2008, OIG audit staff met with agency officials and further discussed the report. 

OIG incorporated the suggestions as appropriate and NRC provided additional 

informal, written comments. On March 4, 2008, OIG issued a formal draft report 

and on March 17, 2008, NRC provided formal written comments (see Appendix 

A). OIG’s responses to NRC’s formal written comments are provided after each 

NRC comment. 

Note: The page numbers used in NRC’s comments (see Appendix A) do not 

correspond with the page numbers in this report because of line spacing 

difference between the draft report (at 1.5 spaces) and the final report (at single 

space). 

NRC General Comment 1 

The draft report state that, “the NRC lacks or does not have the ability to provide 

effective contract oversight.” The NRC does not lack the ability to provide 

effective contract oversight. The NRC complies with Federally mandated training 

certification requirements for its acquisition professionals and project managers. 

At issue in this case is the perceived lack of an adequate framework within the 

requirements of this specific contract to provide effective oversight, e.g., lack of 

more specific billing and reporting requirements. 

OIG Response: 

As stated in the report, NRC’s inability to provide effective contract oversight is 

because the agency is not able to reasonably know the contract’s cost or 

performance details. More specifically, the current contract contains limited 

billing instructions and no requirements for travel reimbursement or for billing 

frequency. Moreover, the statement of work lacks the detailed requirements and 

definitive standards NRC needs to measure the contractor’s performance. As a 

result, NRC currently lacks the ability to provide effective oversight for the 

contract for alternative dispute resolution services. 

NRC General Comment 2 

The draft report also states that, in effect, the NRC does not have any control 

over contract costs for this project. The subject contract type is Firm Fixed price. 

This contract type precludes the need for the NRC to monitor individual cost 

elements and actual costs incurred, with the exception of travel costs which are 
Audit of NRC’s Contract for Alternative Dispute Resolution Services 

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approved by the NRC in accordance with the Federal travel regulations. The 

schedule in the contract dictates pre-established prices for various mediation 

services, regardless of individual cost elements, and represents the pricing 

arrangement that affords the least of degree of risk to the NRC. 

OIG Response: 

The report provides evidence that NRC lacks the necessary controls for effective 

cost oversight. For example, NRC is unable to validate contractor travel 

expenses. 

NRC Recommended Editorial Change Comment 1 

As a result, the price per case can range from a little over $400.00 to almost 

$4,000.00 depending on how far the case proceeds through the process, how 

many days of mediation are required, the travel costs, and whether the NRC is a 

party to the ADR session (post-investigation ADR). 

OIG Response: 

OIG acknowledges that early ADR versus post-investigation ADR can also affect 

the cost of the case. However, the report remains unchanged. 

NRC Recommended Editorial Change Comment 2 

However, the contractor is not required to contact NRC or provide any 

deliverables until task five for early-ADR, which is the mediation conclusion. 

OIG Response: 

The statement of work does not specify early ADR or post-investigation ADR. 

Therefore, the report remains unchanged. 

NRC Recommended Editorial Change Comment 3 

For post-investigation ADR, the NRC is required to be contacted at tasks 1, 2, 

and 3 since they are a party to the mediation session. During task five, the 

contractor is required to provide NRC with a copy of each completed case 

evaluation. 

OIG Response: 

The statement of work does not specify that the contractor should contact NRC 

at tasks 1, 2, or 3. Therefore, the report remains unchanged.