of the fee. As we could not identify any authorization or approval for the fee from FMC
officials, the OIG questions all $5,000 claims for travel time.

Undocumented expenses: These expenses include the amount of unexplained
claims from ten 2005 invoices. Despite a request from the OIG, the contractor did not
provide any documentation to support these claims or any explanation of them. Total
amount questioned is $8,981.

All other: This category includes supplies, miscalculated per diem claims,
concierge services, laundry charges without staying the required days, and unexplained
“misc. claims.” Total questioned costs are $2,025.

The total fees and expenses billed to the FMC from December 2004 through
October 2006 was $159,329.22. The OIG is questioning $65,921.21 in claims from this
time period for reasons stated above.

SUMMARY

The OIG audit focused on two separate but interrelated aspects of the
procurement with the contractor. First, we reviewed the identification and selection of
the contractor and the contractual relationship. Second, we looked at how this contract
was monitored. The method in which this contract was administered and monitored has
contributed significantly to the sums questioned by the OIG.

This particular contract was unique in that the direction for its initial procurement
and substantive oversight came from the chairman of the agency. The chairman
participated in the selection of the contractor with two other senior executives and felt
comfortable with the contractor’s capabilities and skill set. Another government agency,
OPM, assisted in the search and procurement of this contractor. There was no evidence
here to suggest that any prior relationship existed between the chairman and the
contractor.

OIG concerns about this procurement emerged with the decision to hire the
contractor directly through a sole-source procurement. The contractor spent one year
working closely with agency executives and had significant background into the issues
that the chairman wanted to address. On the surface it made little sense to start over and
look for a new contractor. The FAR allows for sole source contracts in these types of
circumstances, but the CO must take extra steps to protect the government’s interests. At
the FMC, short cuts were taken to expedite the hiring of this contractor. While the
agency did save significant overhead costs as an outcome, in the long run, it likely cost
the agency far more by not questioning this contractor’s rates and not including
deliverables, timeframes and an overall ceiling on costs in the work statement or
elsewhere.

There appears to have been a significant breakdown in communication behind the
agency’s failure to monitor this contract adequately. The roles of the key players were

=13'=


schedule vendor, neither raised these, or any sole-source concerns, to the chairman or
attempted to modify the procurement.

Finding 3. Time and Materials Contract Requirements Not Fulfilled

According to FAR 16.601(a)(1), a T&M contract provides for acquiring supplies
or services on the basis of direct labor hours at specified, fixed rates that include wages,
overhead, general and administrative expenses and profit. FAR 52.232-7, Payments
Under T&M Contracts, states that the amount shall be computed by multiplying the
appropriate hourly rates prescribed by the number of direct labor hours performed.

The OIG identified no document in the file identifying the contract as a T&M or
any other contract type. On the other hand, the SOW states that the contractor will be
paid at an hourly rate plus expenses. FMC procurement staff and GSA contract experts
both indicated that this was a T&M contract. It is important to establish this fact as the
T&M contract places certain requirements on both the government and the contractor.

FAR 16.601(c) states that a T&M contract may be used when it is not possible at
the time of placing the contract to estimate accurately costs with any reasonable degree of
confidence. In this action, the nature of the services provided made it difficult to estimate
costs because the length of services to be provided was indeterminate. FAR 16.601(c)(1)
identifies a significant disadvantage of the T&M contract. It provides no positive project
incentive to the contractor for cost control or labor efficiency; therefore appropriate
government surveillance of contractor performance is required to give reasonable
assurance that efficient methods and effective cost controls are being used.

FAR 16.601(d) provides guidance on what documentation must accompany a
T&M contract. A T&M contract may be used (1) only after the CO executes a
determination and findings (D&F) that no other contract type is suitable, and (2) only if
the contract includes a ceiling price that the contractor exceeds at its own risk.

A D&F is a special form of written approval by an authorized official that is
required by statue or regulation as a prerequisite to taking certain contract actions.
According FAR Subpart 1.704, each D&F shall set forth enough facts and circumstances
to clearly and convincingly justify the specific determination made.

The FMC did not perform a D&F prior to entering into this contract. However,
the result would not likely have changed regardless. The nature of the services provided
by the contractor did not easily lend themselves to the government’s preferred fixed price
contract, and the lack of deliverables and timeframes makes anything other than a T&M
contract difficult to manage. The agency did set a ceiling price of $2,000 per day that the
contractor could bill, but did not establish a ceiling price for the life of the contract.

The T&M contract, due to its placing maximum risk on the government, requires

the CO to take additional steps to protect the government’s interests, to include
aggressive monitoring (see below) and the inclusion of select contract clauses -

={[F=


Finding 3. Time and Materials contract requirements not fulfilled.
Finding 4. Inadequate monitoring of the contract.

The Office of Administration concurs with the IG’s assessment that the sole source
contract constitutes a Time and Materials (T&M) contract, given that no other or more specific
contract type was identified at the initiation of the contract. In retrospect, the omission of
contract type at the earliest stages of this contract gave rise to contracting staff and senior
management not ensuring that documents related specifically to use of T&M contracts were
completed, and that necessary contract clauses were incorporated at the time of contracting.
Subsequently, the lack of established requirements for documentation of work accomplished
hampered contract monitoring. Moreover, absent clear communication to OA staff of its
continuing responsibility to review and ensure adequate documentation by the contractor prior to
payment, the process of invoice review proved inadequate for the purposes intended.

With respect to the recommendations contained in the audit report, I have established the
following corrective actions to facilitate accomplishment of the recommended remedies:

Recommendation #1: The Director of Administration review all existing contracts to
ensure that each contains relevant FAR clauses protecting government interests. Ensure
existing procurements are FAR-compliant. Modify contracts as needed.

Response: The Office of Administration concurs with the IG’s recommendation, and has
begun this review process commencing with FY 2007 renewals and recurring orders. Any new
procurement requests above the $5,000 threshold are now sent to the Bureau of Public Debt
(BPD) for procurement action; all requests above the micro-purchase threshold are directed to
BPD for guidance, even if acquired directly by the Office of Management Services. We will
review all existing contracts as recommended and modify any contracts requiring adjustment to
be made FAR-compliant. We have established a due date of July 30, 2007, to accomplish this
corrective action.

Recommendation #2: The Director of Administration consider transferring OA’s
contracting function to the Bureau of Public Debt.

Response: The Office of Administration concurs with the IG’s recommendation with
respect to employing Bureau of Public Debt to better service the agency’s procurement needs. In
FY 2006, OA obtained approval for funding to upgrade FMC’s cross-servicing procurement
support from BPD to provide full-service contracting support. The program was implemented on
a more limited scale in January 2006; in FY 2007, as mentioned above, OA implemented more
comprehensive procedures whereby procurement requests above the $5,000 threshold now are
sent to BPD for procurement action. BPD review and contract servicing specifically includes
review of agency justification for sole source procurements, inclusion of relevant FAR clauses
in agency contracts, and ongoing monitoring of invoices for adequacy of detail and
documentation. Thus, corrective action has been accomplished for this recommendation.


The OIG review of support provided by the contractor in response to the OIG
audit found questionable claims, to include billing the FMC at a flat rate of $2,000 per
day on site instead of the $250 per hour identified in the SOW, unsubstantiated claims for
work performed off site, miscalculated per diem claims, lodging claims in excess of
GSA-established allowances, inconsistent mileage claims between the contractor’s home
and Washington, D.C., missing receipts for most claims over $75, and claims for “misc.”
and “supplies” with no explanation or substantiation.

The contractor discussed the content and results of his meetings with FMC staff
with the agency’s chairman generally on a monthly basis. No summaries or reports were
required or prepared to document contractor activities or outcomes. Review of the
contractor’s invoices, to include verification of hours worked and expenses billed to the
agency, was not performed.

As we reviewed this procurement as a whole, to include a lack of deliverables and
timeframes, unclear objectives and invoices lacking details to justify claims, the OIG
concludes that the contractor had more control over this contract than did the agency.


not spelled out. Instead, assumptions were made about who was doing what. As a result,
the contractor was able to submit invoices that, on their face, contained no support for the
claims he made. The CO indicated that the chairman was monitoring the contract and
assumed that the billings were monitored too. The chairman told the OIG that he
assumed that the agency’s finance and contracting staff had already verified the invoices
for accuracy and compliance with agency and government requirements before he
approved payment. The contractor stated that the SOW did not require receipts, so none
were provided.

The OIG believes that the agency lost control of this contract because there were
minimal controls and conditions placed on the contractor. The agency overpaid for
services, both by removing competitive pressures on the contractor and by approving all
claims submitted by the contractor without requiring even minimum support or
documentation.

While the CO must assume the responsibility for not adhering to FAR
requirements when initiating this contract action, it is also apparent that he was acting to
save the agency FEI overhead costs while keeping the chairman’s preferred contractor at
the agency. This does not mean in any respect that the chairman and/or senior officials
expected the CO to circumvent the rules. Nor have we found evidence that undue
pressure was exerted on the CO.

Moving forward, it is difficult to imagine all the circumstances “re-converging”
that lead to this procurement: the need, the selection, the contract formulation and the
active role played by the agency’s presidentially-appointed chairman in the selection and
substantive monitoring of the contractor. Nevertheless, steps must be taken to implement
basic controls to ensure other procurements are not jeopardized by real or perceived
influence on the CO, or that the regulations are not marginalized due to time constraints
or potential political influence.

As a first step, the FMC has to ensure that other existing contracts are not
similarly “broken.” The CO should review all existing procurements to ensure they were
let consistent with the FAR, and in instances where regulations were not followed, the
agency must modify the contracts immediately or address the requirements when the
contract is recompeted, depending on the judgment of the CO in conjunction with the
Director of Administration. Areas to focus on include contract type, the SOW, including
deliverables, timeframes and support (documentation) required to pay invoices.

Second, the agency should rely on its administrative support contractor, the
Bureau of Public Debt (BPD), for procurement and acquisitions services. As a small
agency, the FMC enters into relatively few contract actions annually. The regulations are
complex and do change. For a modest fee, BPD will assign its contract specialists to
process FMC’s procurement actions. This can be done for procurements over a base
amount (e.g., $10,000, $25,000, etc.), freeing FMC procurement staff to focus on
customer service and small acquisitions.

2 [Dix


[Redacted Copy]

Memorandum
Office of Administration

TO : Inspector General DATE: April 23, 2007

FROM _ : Director of Administration

SUBJECT : Comments on A07-02 — Audit of Contracts FMC-05-00021 and FMC-06-00007,
Procurement of Consulting Services

The Office of Administration (“OA”) has reviewed the findings and recommendations
made in the instant audit, and submits the following response:

Finding 1: Requirement not clearly defined.
Finding 2: Sole source procurement improperly justified.

OA concurs with the IG’s assessment of a failure to ensure compliance with FAR
requirements. This deficiency occurred for a variety of reasons, commencing with the focus
change under the initial Interagency Agreement conducted and administered through the Federal
Executive Institute, and continuing through the subsequent reliance upon sole source contracting
methods and subsequent ad hoc extensions to that contract.

OA acknowledges that responsibility for this lack of compliance may be shared across
many agency components, inclusive of senior management in Administration and assigned OA
contracting staff. Without diminishing nor over-emphasizing the singular role exercised by the
agency head in this matter, any expectations or reliance asserted by others with regard to the
contracts’ development, performance and oversight should not have precluded OA and its staff
from providing appropriate advice in developing contract documents, and in requesting from the
contractor or other parties such information necessary and adequate to OA’s ongoing servicing
and payment under these contracts.


not determine the answer from either the invoices submitted or the additional information
provided by the contractor in response to the audit. The OIG noted that for the 22
invoices reviewed, all preparation (off-site) fees were in $1,000 increments.

Due to the absence of any meaningful accounting records to document incurred
costs and the contractor’s practice of rounding preparation time into $1,000 increments,
the OIG is questioning all off-site fees, totaling $32,000.

Expenses

The “expenses” cost category includes airfare, hotel, per diem, supplies, taxis,
travel time from Asheville, NC, parking and supplies. On invoices received and paid by
the FMC, the line item that captured these cost categories read “travel, materials and
other expenses.” One sum was provided on the invoice to capture all expenses, with no
distinction among cost categories. No receipts were provided with any invoice submitted
to the FMC for payment.

Chapter 31 of the FAR provides cost guidance to contractors. For example, FAR
31.205-46 states that costs incurred by contractor personnel on official company business
are allowable, subject to certain limitations. Costs incurred for lodging, meals and
incidental expenses are allowable only to the extent they do not exceed the maximum per
diem rates in effect at the time of travel. Maximum per diem rates would not generally
constitute a reasonable charge on partial travel days (e.g., day of departure and return).
Documentation to support actual costs incurred shall be in accordance with contractor’s
established practices, provided that a receipt is required for each expenditure of $75 or
more.

In addition to the FAR, the SOW in effect for the procurement action stated that
“an itemized invoice (emphasis added) received by the agency, and acceptance and
approval by either the CO or the agency chairman, are the conditions required for proper
payment.”

To assist in the audit, the OIG requested that the contractor break out all expenses
claimed and provide receipts going back two years (December 2004). In response, the
OIG received most hotel receipts but little else in the way of documentation to
substantiate claims. In our review of the documentation provided, we did not question
any claim less than $75 as long as the claim was explained. For example, we did not
question parking and taxi fares because these were identified on documents provided in
response to the audit. On the other hand, there were charges for $45, $50 and other
amounts that contained no explanations and were not accompanied by receipts. We
questioned those claims.

Transportation: The contractor traveled between his home and Washington, D.C.
on commercial airlines or by use of his personal vehicle (POV). While the contractor
provided no airfare receipts, he did provide select credit card statements and airline
reservation printouts from on-line travel services that corresponded to his FMC visits.

-16-


The revised SOW more clearly references the types of activities the contractor
would be performing than prior SOW’s that focused entirely on “planning.” Under the
SOW heading “Objectives and Scope,” the contractor’s broadened responsibilities were
identified:

1 diagnosis of the organization and follow-on assistance in
implementing required changes;

2 advice and counsel to the chairman;

3 organization diagnosis to include the Myers Briggs Type
Indicator, 360 degree and other evaluations;

4 leadership team development for the chairman and Senior
Executive Service;

5 conflict resolution and mediation services;

6 strategic planning;

7 project management and time management;

8 workforce planning;

9 executive coaching;

10 team building and staff development;

11 development of mission, vision and values statements;

12 realignment/reorganization;

13 dealing with problem employees;

14 overhaul of the performance appraisal system;

15 implementation of change;

16 understanding policy, politics and administration;

17 organizational alignment; and

18 working with clients, stakeholders, customers and other
interested parties.

While these appear to represent what the contractor was capable of providing to
the agency, it is unclear to the OIG which of these services represented a need of the
agency and how this need would be addressed.

FMC internal guidance for procurements is found in Commission Order 112,
effective 12/15/03. Section 7(a) places responsibility on the CO to ensure that the scope
of work “is sufficiently clear to hold both the contractor and the Government
accountable.” Section 7(b)(2) requires that the requesting unit “identify the products or
services required, the quantity or length of service, the timeframe when the product or
service is needed and a total cost estimate.” Section 8 (b)(2)(ii) cautions that the SOW
should solicit only the actual needs of the Government. The OIG believes that agency
efforts in this procurement action did not meet the requirements identified above.

The revised SOW also fell short of FAR guidelines. According to FAR Subpart
8.405-2, Ordering Procedures for Services Requiring a Statement of Work, all SOW’s
shall include the (1) work to be performed, (2) location of the work, (3) period of
performance, (4) deliverable schedule, (5) applicable performance standards, and (6) any


OBJECTIVE, SCOPE AND METHODOLOGY

The objective of the audit was to determine whether Federal Acquisition
Regulation (FAR) provisions were followed throughout all phases of the contract.* To
meet this objective, the Office of Inspector General (OIG) reviewed (i) how the need was
determined, (ii) the statement of work, including deliverables, (iii) the selection process,
evaluation criteria and scoring, (iv) contract award, (v) contract monitoring, (vi) approval
of invoices, including all supporting documentation for days worked, mileage, lodging
and other billed expenses, and (vii) the justification and timing of contract modifications.

The scope of our review covered the period December 2004 through October
2006, although we collected documentation going back to September 2003 to provide
background for the audit. Prior to the initiation of the contract, the contractor worked for
the FMC through the vehicle of an IA with the Office of Personnel Management’s FEI.
FMC obligating documents show that FMC paid FEI approximately $60,000 for services
provided by the contractor to the FMC during the period September 2003 through
November 2004.* From December 2004 through October 2006, the FMC paid the
contractor directly the sum of $159,329.

We began the audit by reviewing the contract file, beginning with the IA between
the FEI and the FMC to understand how the contractor was identified and selected. We
also reviewed purchase orders, order modifications, work statements, the Justification
and Analysis (J&A) in the contract file and notes by senior agency officials regarding the
evaluation of proposed contractors. We reviewed correspondence between the contractor
and agency procurement and program staff discussing various performance and payment
issues and strategies per the contract.

In addition to our document review, we met with agency officials who played
some role in implementing the contracts. We met with the FMC’s contracting officer and
procurement specialist to discuss how the contractor was identified and selected, the FAR
requirements pertaining to this procurement action and how they were implemented,
contract monitoring and payment of invoices. We also met with the Director of OFM to
discuss contract funding mechanisms and the timing of actions taken to fund the PO and
the order modifications. We discussed contractor evaluations and contract requirements
with senior management officials who participated in the selection process, including the
former chairman of the FMC. We met with General Service Administration (GSA) FAR
Counsel staff to discuss FAR provisions and authorities as they pertain to this
procurement action.

5 The Federal Acquisition Regulation is established for the codification and publication of uniform policies
and procedures for acquisition by all executive agencies. As such, it is the definitive authority for
procurement actions implemented by the Federal government.

“The sums paid to FEI include FEI overhead of approximately 25 percent. In addition, funds were paid

through interagency transfers. As the IA with FEI was not within the scope of this audit, we relied on FMC
obligating documents (Optional Form 347) to estimate expenditures.

Bie


Audit of Contracts FMC-05-00021 and FMC-06-00007
Procurement of Consulting Services

BACKGROUND

The Federal Maritime Commission (FMC) is an independent regulatory agency
responsible for the regulation of ocean-borne transportation in the foreign commerce of
the United States. The principal statutes or statutory provisions administered by the
Commission are the Shipping Act of 1984, the Foreign Shipping Practices Act of 1988,
section 19 of the Merchant Marine Act of 1920 and Public Law 89-777. In FY 2006, the
Commission was authorized a total of 180 full time equivalent (FTE) positions and had
an appropriation of approximately $21,000,000. That appropriation supported the actual
employment of 125 FTE positions, rent, travel, training and the purchase of other goods
and services during the fiscal year.

The Office of Administration is responsible for implementing the administrative
directives of the chairman. The Director oversees the agency’s administrative offices:
Office of Human Resources (OHR), Office of Information Technology (OIT), Office
of Financial Management (OFM) and the Office of Management Services (OMS).

The OMS directs and administers a variety of management service functions that
provide administrative support to the program operations of the Commission. The Office
procures, secures and/or furnishes all supplies, equipment and services required in
support of the agency's mission, and arranges for facilities management and security. The
Director of OMS serves as the agency's Chief Contracting Officer.

On September 25, 2003, the FMC entered into an Interagency Agreement (IA)
with the Office of Personnel Management’s (OPM) Federal Executive Institute (FEI) (t)o
provide training, guidance, and materials for agency executives in the areas of strategic,
performance, and annual planning, in accordance with the Government Performance and
Results Act (GPRA). The agency accepted one of the FEI-recommended consultants to
provide those services to meet the FMC’s identified need. The IA was renewed on
10/1/04 for one additional year.

On December 21, 2004, the FMC issued purchase order FMC-05-00021 to
continue consultant services provided by the contractor through the vehicle of a sole
source contract. From December 2004 through October 2006, the contractor provided
services to, and was paid directly by, the FMC. The agreement with him allowed for
compensation at the rate of $250 per hour or $2,000 per day.


On one trip, he departed from Indianapolis, IN, instead of his home airport (Asheville,
NC), a distance of about 500 miles, without any explanation. We did not question this
particular cost but identify it here to illustrate one example of a claim that should have
been discussed with the contractor prior to reimbursement. Due to fluctuating airfares,
the increase in fare ($60) over the prior fare (two months previous) seemed reasonable.

Another inconsistency that should have been explained concerns a mileage claim
resulting from the use of the contractor’s personal vehicle. In January 2005, the
contractor claimed $367 for round trip mileage (GSA reimbursement rate of .375/mile)
between his home and the FMC. In August 2006, he claimed $575 for the same trip
(GSA reimbursement rate of .445/mile). The difference in GSA reimbursement rates
accounts for $68 of the $208 discrepancy. The contractor indicated that the claim for
$575 included parking.

Although a three-day parking fee of $140 seems excessive, we suspect that he
used his vehicle for other purposes while in Washington, D.C. We did not question the
claim.

The OIG identified three months in 2006 that lacked any supporting documents of
any kind for airfare. The OIG questions $1,448 in airfare claims. We also identified
another $140 in unsubstantiated administrative fees resulting from the contractor’s time
required to schedule flights. Total questioned costs are $1,588.

Lodging: In response to the audit, the contractor generally provided receipts for
hotel stays occurring in CY 2006. While the OIG identified some charges on the receipts
that are not reimbursable, most claims were supported.

For CY2005, the contractor provided only two hotel receipts in response to our
request. Instead, he provided credit card statements identifying the hotel, transaction date
and the amount billed. Lacking line-item detail prevented us from identifying non-
reimbursable claims, as we identified on CY 2006 hotel invoices submitted to us.
Nevertheless we questioned no hotel charges supported by a credit card statement.

We are questioning $902 in hotel claims due to (i) missing receipts (two months)
and (ii) exceeding the GSA lodging allowance by $286 over a three-night stay.

Travel Time: In January 2006, the contractor began billing the agency for time
spent traveling between Asheville, NC and Washington, D.C. The flat charge was $500.
It is unclear how the fee was determined or why the fee was applied beginning in 2006.

According to the contractor, the fee was claimed pursuant to the fee schedule
provided to the agency. He also stated that the chairman and the CO approved the fee.
The OIG notes that we found no fee schedule in the contract file, nor is his assertion
regarding approvals supported by our discussions with the former chairman and the CO.
We recognize that travel time is a legitimate expense, but question the unilateral setting

aT


We also question whether this contract was adequately monitored by the agency.
The contractor was not required to submit progress reports, and the SOW contained no
deliverables to hold the contractor accountable. The chairman oversaw the contractor
through monthly meetings when the contractor was on site. Status reports were not
required or provided. Invoices submitted by the contractor contained no FAR-required
details, e.g., receipts, time sheets, mileage calculations, etc., that would allow anyone
reviewing these claims to independently verify their veracity and their accuracy. All
such invoices were approved and paid.

Finding 1. Requirement Not Clearly Defined

According to Chapter 10 of the FAR, acquisitions begin with a description of the
Government’s needs. In the summer of 2003, the FMC identified a need for “strategic,
performance and annual planning in accordance with the Government Performance and
Results Act.” To meet this need, agency executives contacted the FEI for assistance in
identifying an individual who could assist the FMC in meeting this need.

The contractor was preferred by agency executives because of his “hands-on,
practical experience” managing large governmental facilities. But according to one
agency executive involved in the decision process, the chairman wanted more than a
strategic planner. He wanted an individual to work as an advisor to effectively bring
about change at the agency. According to the contractor, he was initially asked to assist
with strategic planning, but determined that the FMC had more “fundamental issues” that
took priority. He advised that these, rather than planning activities, needed to be
addressed first. The chairman agreed with this assessment.

The IA was not modified to reflect this changed focus. Nor did the OIG identify
any documentation describing the change in the agency’s needs in the contract file for
this period. The FY 2004 contract file contained a draft SOW entitled “Statement of
Work for Strategic and Annual Plans.” The SOW deliverables included strategic plans
and updated annual plans. On 10/1/04, the FMC renewed the IA for another year, again
calling for assistance in providing planning activities. According to the CO, this changed
focus (from planning to addressing “other fundamental issues”) was not communicated to
him.

In December 2004, the FMC and the contractor determined that it would be
mutually beneficial if the agency contracted directly with him for services. The FMC
could save FEI overhead costs, and payment problems experienced by the contractor
through his employer, FEI, would be ameliorated. According to the former FMC
chairman, the CO recommended to him that contractual arrangements be changed. The
chairman signed off (agreed to) the recommendation and, according to him, left the
contracting details to the administrative staff. On 12/21/04, the agency signed a purchase
order obligating $60,000 for the “continuation of consulting services provided to the
FMC by (the contractor) for FY 2005 as described in the attached Statement of Work.”
The contractor now worked directly for the FMC.


Recommendation #3: The Director of Administration recover costs totaling
$65,921.94 due to unallowable claims and inadequate documentation to support costs.

Response: The Office of Administration concurs with the IG’s recommendation to seek
recovery of certain claims or costs relating to this contract.

While OA substantially concurs with the methodologies employed by the IG in
determining the amounts of unallowable claims based on information and documents provided
by the contractor, OA staff is currently reviewing internal agency records which may mitigate a
portion of the documentation requirements for those “off-site” professional fees which the
contractor was unable to provide to the IG in the course of the audit. OA anticipates that the
amount recommended for recovery may be adjusted downward in this single category of off-site
fees, where such records appear to document ongoing consultations with the Chairman or FMC
senior management. Any such documentation found will be made available to the IG for review.

The FMC will use established debt collection procedures to attempt to recover the funds
discussed in the above Recommendation. On Treasury’s website, examples of debts which are
covered by the Debt Collection Improvement Act include payments disallowed by Inspector
General audits (www.fms.treas.gov/debt/questions.html). The procedure OA will use to collect
these funds is described in Commission Order 107, Cash Management: an invoice will be
prepared by OA and BPD will process it as described in section 4 of the Order. If, for any
reason, the debt is not collected within established timeframes, the debt will be referred to
Treasury for collection, as provided in section 9 of the Order. The Order establishes FMC’s
procedures based upon Treasury guidelines in 31 CFR Part 901; 31 CFR 901 also sets forth,
among other things, the content of demand letters, collection by administrative offset, collection
in one lump sum or in installments, and the assessment of interest and penalties. The authority
for FMC’s administrative offset procedures are currently codified in 46 CFR Part 505.

Actual recovery of the funds depends on circumstances outside of FMC’s control, thus
completion of the FMC’s responsibilities in initiating recovery of the funds will resolve this
corrective action. By June 30, 2007, the FMC will initiate a process to recover the recommended
amount (or an amended amount, depending upon the outcome of OA’s review described above).

If you have any questions concerning the above, please feel free to contact me.

/ ll Fis

L te
Peter J. King

cc: Commissioners
Director, OFM
Director, OMS
General Counsel


Office of Inspector General

Audit of Contracts
FMC-05-00021 and FMC-06-00007
Procurement of Consulting Services

May 2007

FEDERAL MARITIME COMMISSION



cited the first exemption to justify its sole source procurement of services from the
contractor.

FAR Subpart 6.303-1 requires contracting officers to document the reasons for
using a sole source contract. Subpart 6.303-2 requires that each justification contain
sufficient facts and rationale to justify the use of the specific authority cited (e.g., which
of the seven exemptions apply) and pertinent information to include the identification of
the agency and the contracting activity and a description of the action being approved.
Some of the other required elements of a sole source justification include the following
information:

1. A description of the supplies and services required to meet the agency’s needs,
including the estimated value of those services.

2. A demonstration that the proposed contractor’s unique qualifications or the nature
of the acquisition requires use of the authority cited.

3. A description of the efforts made to ensure that offers are solicited from as many
potential sources as is practicable, including whether a notice was or will be
publicized. (See below.)

4. A determination by the contracting officer that the anticipated cost to the
Government will be fair and reasonable. (See below.)

5. A statement of the reasons why market research was not conducted (if
applicable).

The justification in the file contained relevant background information about the
FMC and a justification for the sole source procurement, as stated below:

In order to improve its planning processes, the FMC entered into an
interagency agreement with the OPM’s Federal Executive Institute (FEI) for
leadership support to provide training, guidance and materials for agency
executives in strategic performance and annual planning. Under the
auspices of this September 30, 2003 interagency agreement, the FMC met
with several of FEI’s consultants and selected (the contractor) as the best
candidate for the FMC’s needs. (He) has worked closely with the FMC
chairman, the agency’s senior executives and managers since that time.
Pursuant to discussions with management officials and (the contractor), the
agency has decided to contract directly with (him) for his services, and in
doing so the FMC would save more than 30 percent in contract and service
fees. As a result of this procurement approach, and his hands on experience
in working with FMC management personnel, (he) is the only responsible
source to satisfy this agency’s executive strategic planning and training
requirements...

This document continues the planning requirement first identified in the [A with
FE] and not the broadened responsibilities contained in the SOW that was referenced in
the purchase order that was dated 12/21/04 (FY 2005). Further, it does not (i) identify the
services that only the contractor is uniquely qualified to provide, (ii) describe the services

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special requirements (e.g., security clearances, travel, special knowledge).° By contrast,
the SOW prepared by the FMC and the contractor’ contained sections on FMC
background, objectives and scope, security requirements, government furnished
resources, points of contact, billing information and procurement authority.

Without identifying performance periods, work products or deliverables,
deliverable schedules and applicable performance standards, the FMC left the
requirement open ended and in the control of the contractor.

Finding 2. Sole Source Procurement Improperly Justified

FAR 2.101 defines a sole source acquisition as a contract for the purchase of
supplies or services that is entered into by an agency after soliciting and negotiating with
only one source.

41 U.S.C. 253 requires, with certain limited exceptions, that contracting officers
promote and provide for full and open competition in soliciting offers and awarding
Government contracts. Similarly, Commission Order 112, Procurement, states that all
procurement transactions shall be conducted in a manner that provides for and promotes,
to the maximum extent practicable, full and open competition, and does not place
unnecessarily restrictive conditions or provisions in the contracting action that unduly
limit competition.

41 U.S.C. 253(c) authorizes, under certain conditions, contracting without
providing for full and open competition. However, before such contracting can be
initiated, one of the exemptions to full and open competition must apply. FAR Subpart
6.302 identifies seven such exemptions:

1. Only one responsible source and no other supplies or services
will satisfy agency requirements;

Unusual and compelling urgency;

Industrial mobilization; engineering, developmental, or research
capability; or expert services;

International agreement;

Authorized or required by statute;

National security; and

Public interest.

wr

AAAS

The FAR contains guidance for each exemption to assist agency officials in
determining whether the exemption applies to the planned procurement action. The FMC

° FAR 8.4, Federal Supply Schedules, provides guidance to Federal agencies when selecting vendors from
GSA’s Federal Supply Schedule. The FMC contractor was not selected as part of this program. However,
the FAR guidelines concerning what constitutes an effective SOW provide useful criteria in evaluating the
SOW prepared by the FMC.

7 The OIG learned that the contractor assisted FMC staff in preparing the revised SOW because it was
unclear to the CO what services the contractor would be providing to the agency.

mij


We submitted questions to the contractor via his home email account requesting
information on events leading up to his appointment and his billing practices.> We also
requested billing documentation to support his fee and expense claims. With information
provided by the contractor, the OIG determined whether his submitted claims were
adequately supported and allowable, based on FAR cost guidelines. We then totaled all
of the “questioned costs” and provided details to management to recover those costs from
the contractor.

To identify criteria for the audit, we reviewed FAR sections applicable to sole
source procurements, T&M contracts and claims reimbursement guidance. We also
reviewed Commission Order 112, Procurement, to identify agency-specific contracting
policies.

We conducted this compliance audit in accordance with generally accepted
government auditing standards during the period December 2006 through March 2007.
Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence that provides a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained supports our
findings and conclusions based on our audit objectives. All fieldwork was performed at
FMC headquarters in Washington, D.C.

FINDINGS

The procurement action entered into with the contractor did not follow the
requirements for contracting as contained in the FAR or the FMC’s own internal policies
and procedures. The agency’s needs were not articulated in the SOW and there was no
proposal submitted by the contractor describing how he would meet the government’s
needs. The agency did not document evaluation criteria or evaluation results. The sole
source justifications in the contract file were limited to documenting a need for strategic
planning and that only the contractor could meet that need. Over the life of this
agreement with the contractor, no strategic planning services were provided by him.

Instead of full and open competition, the FMC ordered services directly from the
contractor. This sole source procurement was improperly documented. The J&A, i.e.,
the government’s rationale for requiring a sole source award, was unconvincing and
lacked most FAR-required documentation. Further, the procurement action was not
advertised as required in either the Commerce Business Daily or “Fedbizopps.com,” to
provide some assurances that someone as qualified as the contractor, who could have
performed the same services at a lower price, did not exist or at least was not available to
work for the agency when the need arose. Over the life of the contract, we identified no
attempts to remove the “barriers to competition” that would have enabled this
requirement to be competed.

* Following our first correspondence with the contractor, he obtained legal counsel. All subsequent
correspondence occurred through his counsel.


RECOMMENDATIONS
The OIG recommends that the Director of Administration:

1. Review all existing contracts to ensure that each contains relevant FAR clauses
protecting government interests. Ensure existing procurements are FAR-
compliant. Modify contracts as needed.

2. Transfer the contracting function to the Bureau of Public Debt. FMC contract
staff could then focus on assisting FMC employees and serve as a liaison between
BPD and FMC staff.

3. Recover fees paid to the contractor totaling $65,921.21 due to unallowable claims
and inadequate documentation to support the costs.

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The agency did not prepare a formal contract, but instead detailed the
procurement on Optional Form 347, Order for Supplies or Services, or simply, a purchase
order (PO). The PO referenced the SOW, which provided minimum guidance and
parameters regarding the services the contractor would be providing.

While the OIG identified no documentation in the file identifying the contract
type, our review of supporting documentation and discussions with FMC and General
Services Administration (GSA) procurement staff indicate that the FMC entered into a
Time and Materials (T&M) contract with the contractor. A T&M contract specifies an
hourly wage and reimburses contractor expenses at cost. T&M contracts are well suited
to situations where the length of the services to be provided is difficult to estimate.

When entering into a T&M contract, federal regulations require that the CO
prepare a “Determinations and Findings” (D&F) memorandum which (i) documents the
steps taken by the CO to ensure that no other contract type is suitable and (ii) identifies a
ceiling price on the contract. Although the OIG found no D&F in the file, given the
nature of the services, it is unlikely that other contract types would be appropriate. The
CO did establish a ceiling price of $2,000 per day in the SOW but did not set a ceiling on
the procurement in its entirety.

On December 21, 2004, the FMC issued Order No. FMC-05-00021, which
continued the consulting services provided to the FMC by the contractor for FY 2005 and
references the SOW and the18 specific services to be provided. The period of
performance was identified as 12/01/04 to 09/30/05. The total amount of the award was
$60,000. The FMC issued a modification to the PO on 09/01/05 for an additional $7,000.
On 10/26/05, the FMC issued Order No. FMC 06-00007 for $10,000 to continue
consulting services provided by the contractor for FY2006. On 01/10/06 and 07/12/06,
the FMC issued modifications to the PO to increase funding by $55,000 and $20,000
respectively.

The FMC received its first invoice from the contractor on December 22, 2004,
totaling $8,939.80, for services he provided to the Commission between 12/06/04 —
12/10/04. During most of fiscal year 2005, all of fiscal year 2006 and one month in FY
2007, the FMC paid 22 invoices submitted by the contractor totaling $159,329 for fees
and expenses related to his consulting services at the agency.”

All contractor invoices were submitted monthly and contained two line items: (i)
professional fees, and (ii) travel, materials and other expenses. Invoices contained no
support for either category, such as time sheets, a description of tasks performed during
the month, hotel bills, airfare receipts or any other documentation. All invoices were
approved without question by the agency.

? One additional invoice for $6,500 was submitted in FY 2007 for fees and expenses resulting from an
FMC-cancelled visit. That invoice is not included in the universe of amounts claimed by the contractor
because, as of the issuance of this audit report, it has not been paid by the FMC.

29s


boilerplate language inserted in all government contracts. The FAR requires the
government to reference 13 clauses in the contract. The OIG determined that no required
clauses were referenced in the PO or any document that we reviewed.*

Based on our review, the OIG concludes that the agency did not take additional
steps to monitor this contract, as recommended by the FAR, to provide some assurances
that efficient methods and effective cost controls were used. As a result, some of the
risks inherent in a T&M contract were realized — as described below.

Finding 4. Inadequate Monitoring of the Contract

Establishing the contractual relationship, especially documenting what is expected
of the contractor, when it is expected by and setting requirements for invoicing are
essential to a smoothly run contractual relationship. While the nature of the services
made setting timeframes and deliverables difficult to quantify and qualify, not having
either has made it difficult to hold the contractor accountable.

The OIG cannot opine on the effectiveness of the contractor or whether he met
performance objectives because neither objectives nor deliverables were identified in the
SOW. However, we were able to review billing statements (invoices) with the narrow
focus of determining whether they were supported by adequate documentation and
whether the claims were reimbursable.

The OIG reviewed contractor invoices for the period December 2004 through
October 2006 — a total of 22 invoices totaling over $159,000. Based on our review of the
invoices alone, (i.e., prior to our request for supporting documentation from the
contractor), we were not able to determine whether the fees and expenses billed to the
agency were in keeping with FAR guidance. In all cases, the FMC paid the invoices
lacking any support or documentation from the contractor.

The OIG, in keeping with FAR provisions 42.101(a)(2), 52.215-2 and 4.703,
requested documentation to support claims made by the contractor resulting from
services he performed as a consultant to the FMC.” Based on our review of this
information, the OIG identified unsupported claims and non-reimbursable items that were

8 Although the OIG identified four FAR clauses referenced in the SOW (1.403, Individual Deviations,
13.003(a) Simplified Acquisition Policy, 13.301, Government wide Commercial Purchase Card, and
37.203(b)(3), Advisory and Assistance Services Policy), none of these clauses are required T&M
solicitation provisions and contract clauses per FAR 52.307.

° FAR 42.101(a)(2-3) states that the auditor is responsible for reviewing the financial and accounting
aspects of the contractor’s cost control systems and performing other analyses and reviews that require
access to the contractor's financial and accounting records supporting proposed and incurred costs. FAR
52.215-2 states that the contractor shall maintain and the CO, or an authorized representative of the CO,
shall have the right to examine and audit all records and other evidence sufficient to reflect properly all
costs claimed to have been incurred directly or indirectly in performance of this contract. FAR 4.703
requires contractors to make available records to satisfy contract audit requirements for three years after
final payment.

~13is


The contractor stated that the FMC chairman and the CO approved this flat rate at
the inception of the contract with the FMC. He also stated that the rate was reflected in
the “fee schedule” he provided to the agency at the commencement of the contract.
According to the former chairman and the CO, the contractor did not request to be paid a
flat rate, nor did either receive or approve a contractor fee schedule. Further, the CO
indicated that the contractor provided his fee schedule for the first time in January 2007,
months after last performing services for the agency.

For the 22 months reviewed by the OIG, we are questioning on-site fees totaling
$15,375.

Off-Site Fees: Unlike its on-site fee counterpart, the OIG found no
documentation to support these fees totaling $32,000 over 22 months. Several FAR cost
principles apply to the OIG analysis of these claimed costs.'° FAR 31.205-33(b) states
that costs of professional and consultant services are allowable when reasonable in
relation to the services rendered. Since the OIG could not determine the nature of the
services provided based on invoices submitted or subsequent requests to the contractor
for documentation as part of the audit, we have no basis to conclude whether the claims
were, in fact, reasonable.

FAR 31.205-33(f) states that fees for services rendered shall be allowable only
when supported by evidence of the nature and scope of the services furnished. FAR
31.205-33(f)(2) requires invoices to contain sufficient detail as to the time expended and
the nature of the actual services provided. As stated, the OIG identified no
documentation to identify or describe the hours worked off-site.

The contractor told the OIG that he did not maintain logs or other documentation
for off-site fees. Instead, at the end of the month, he reviewed his activities (e.g., calls to
and from FMC personnel, preparation for on-site trips, research, drafting agendas, etc.).
He then “averaged the amount of time invested and billed the FMC for a half day or
whole day, depending on the amount of work dedicated to FMC activities.”

Without records, it is unclear how such an accounting can accurately detail the
time spent among several Federal clients.'! Having to go back several weeks to estimate
time spent, for example, on a phone call seems to the OIG to be a difficult and inexact
proposition. Also unclear is the contractor’s basis and authority for billing in half / whole
day ($1,000 / $2,000) increments. At a minimum, it seems to run counter to the
contractor’s stated policy of billing at $250 per hour while off site. As he maintained no
documentation to support his off-site fees, we could not assess whether his claims were
valid. For instance, the OIG rhetorically asks whether a $1,000 claim reflects four hours
of detailed preparation or a 45 minute phone call to discuss scheduling. The OIG could

'° FAR, Part 31 — Contract Cost Principles and Procedures, contains guidance for the pricing of contracts
and subcontracts. These principles also provide useful guidance to assess contractor service costs.

"' In addition to the FMC, the contractor indicated that he worked for three other federal agencies during
the period that he performed consulting services for the FMC.

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PROCUREMENT SUMMARY

The procurement of consulting services provided by the contractor began in the
last quarter of FY 2003.' The Federal Maritime Commission (FMC) was seeking
assistance to enhance its strategic, performance and annual planning processes. Agency
staff contacted the Office of Personnel Management’s Federal Executive Institute (FEI)
to inquire how the institute could assist the FMC. FEI provided the FMC with the names
of three candidates with the requisite skills. The three were interviewed by the chairman
and two senior managers. The contractor was selected based on his practical, hands on,
Federal experience. The agency signed an Interagency Agreement (IA) with FEI to
provide these services for one year, effective 09/25/03 through 09/30/04. The
contractor’s fee was $250 per hour. FEI’s overhead fee added another approximately $60
per hour.

Shortly after the contractor began work under the IA, the scope of services
broadened considerably. He performed an organizational analysis and identified
“fundamental issues” that needed to be addressed before he would undertake any
strategic planning activities. This modified requirement was endorsed by the FMC
chairman. The IA, however, was not modified.

In FY 2005, the FMC renewed the IA with FEI, effective 10/1/04 through
09/30/05, but, early in the fiscal year, the agency began to take steps to contract directly
with the contractor. The decision was primarily financial — the FMC would save the
hourly overhead paid to FEI. The contractor, we suspect, also favored the new
arrangement as he had been experiencing payroll problems (e.g., delays) with FEI.

To contract with the contractor directly meant that the agency did not compete the
requirement in the open market. Instead, the agency issued a “sole source” contract. The
agency updated the work statement (Statement of Work or SOW) and prepared a
“Justification & Analysis” (J&A), which, in effect, justifies the use of a sole source
contract. The SOW we reviewed contained separate sections on procurement (i)
objectives and scope and (ii) compensation. The objectives and scope identified 18
specific services to be provided by the contractor. The compensation section set his
compensation at $250 per hour or $2,000 per day, plus expenses. However, the work
statement did not specify deliverables or project timeframes.

According to the J&A in the contract file, the contractor was the only responsible
source to meet the agency’s needs and no other services would satisfy agency
requirements. Further, the contracting officer (CO) identified the contractor’s hands on
experience working with FMC management as the reason that he was the only
responsible source.

" Ttis the policy of the Office of Inspector General not to identify individuals by name in publicly-available
audit reports. Although it may make for cumbersome reading at times, we routinely refer to the subject of
the audit as “the contractor.”


FEDERAL MARITIME COMMISSION
800 North Capitol Street, N.W.
Washington, DC 20573

May 4, 2007

Tel: (202) 523-5863
Office of Inspector General Fax: (202) 566-0043
E-mail: oig@fmc.gov

TO: The Commission

FROM: Adam R. rest OD. [ge
al

Inspector Gener:

SUBJECT: Transmittal of OIG Audit Report

Attached for your information is a recently completed Office of Inspector General
(OIG) audit entitled Audit of Contracts FMC-05-00021 and FMC-06-00007, Procurement of
Consulting Services. The audit contains four findings and three recommendations for
corrective action.

The audit found that the procurement action entered into with the contractor did not
follow the requirements for contracting as contained in the Federal Acquisitions Regulation
(FAR) or the Federal Maritime Commission’s (FMC) own internal policies and procedures.
We also questioned whether this contract was adequately monitored by the agency. The
contractor was not required to submit progress reports and the Statement of Work contained
no deliverables or timeframes to hold the contractor accountable. Invoices submitted by the
contractor contained no FAR-required details, e.g., receipts, time sheets, mileage
calculations, etc., that would allow anyone reviewing these claims to verify their veracity and
their accuracy. All such invoices were, nonetheless, approved and paid.

Moving forward, the OIG believes that the agency should rely on assistance from the
Bureau of Public Debt (BPD), the agency’s administrative services agent, for contract
support. BPD has contracting experts that let over $200 million in contracts each year. By
contrast, the FMC enters into few contracts totaling less than $787,000 annually. The agency
simply does not do enough contracting to maintain the expertise it needs and to stay current
with complex federal regulations in the acquisitions area.

The OIG is also recommending that the agency recover $65,922 of $159,329 in
fees and expenses it paid to the contractor over a two year period, due primarily to the
absence of receipts, explanations and/or documentation to support his claims.

lam available at your convenience to discuss the audit findings and recommendations.


required to meet the agency’s needs, (iii) demonstrate that the contractor’s unique
qualifications requires use of the authority (e.g., exemption) cited, (iv) describe efforts
made to ensure that offers were solicited from many sources, (v) determine that the
proposed cost to the Government is fair and reasonable, and (vi) explain why market
research was not conducted. It essentially says that the contractor is the best source
because he’s worked at the FMC before and knows the agency. The same justification is
used again in FY 2006, which indicates that the FMC did not take steps to remove the

barriers to competition that necessitated the sole source procurement, as required by
the FAR.

Two of the above-identified requirements deserve special attention as they are
instrumental in assuring that the government, regardless of the sole source selection,
continues to receive the best value. FAR 6.301(d) requires that the CO solicit offers from
as many potential sources as is practicable under the circumstances when not providing
for full and open competition. Part 5 of the FAR describes policies and procedures for
publicizing contract opportunities. Subpart 5.101 requires the CO to disseminate
information on proposed contract actions expected to exceed $25,000 in a “Government-
wide Point of Entry” (GPE), such as the Commerce Business Daily or fedbizopps.gov.
The FAR’s intention is to document that the Government has taken steps to compete but
found no comparable source. This contract action did not provide for any public notice.

The second unaddressed requirement involves a determination that the proposed
price (to the Government) is fair and reasonable. Contracting officers generally conduct
market research to determine the “going rate” for similar services. While the selection of
another contractor was not a likely outcome in this instance, a price reasonableness
determination could have put pressure on the contractor to approximate rates of similarly
qualified consultants. Instead, he was allowed to set his fee without having to consider
competitive pressures. One individual at the FEI indicated that the contractor’s rates
were at the “high end” among its organization development consultants.

The OIG concludes that the CO had few options other than to do a sole source
procurement. The bottom line is that the contractor was already on board and working
with agency executives and the CO did not feel re-competing the requirement was an
option.

We also noted that no one in the chain of command in the Office of
Administration challenged this procurement. According to Commission Order 112,
Procurement, the Director of Administration is the Senior Procurement Executive (SPE)
responsible for providing management direction and general administrative guidance
regarding all procurement strategies, implementing procurement policies and approving
all purchases over $10,000. The Deputy Director for Administration is responsible for
challenging barriers to competition, reviewing procurement practices and reporting to the
SPE. The Deputy is also responsible for reviewing for concurrence all purchases over
$10,000, prior to SPE review. While both of these officials told the OIG that they had
some concerns either with the contractor or the agency’s procurement of a non-GSA

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paid by the agency. The OIG has provided line-item detail to the contracting officer with
the recommendation that funds be recovered from the contractor. The total amount
questioned by the OIG is $65,921.21. Below is a summary of the methodology and
subtotal by major cost categories.

Professional Fees

According to the contractor’s response to questions from the OIG, he set his fees
at $2,000 per day for work performed “on-site,” and $250 per hour for work performed
“off-site.” According to the SOW, which provides guidance on contractor compensation.
his fees were to be reimbursed at a rate of “$250 per hour or $2,000 per day.” No
distinction was made between on-site versus off-site activities. According to the FMC’s
contracting officer, his compensation was set at $250 per hour, or $2,000 per day, based
on him working an 8 hour day. The CO further explained that his intent in setting the
contractor’s compensation was to continue the arrangement the agency had with FEI.
Under this agreement, he was paid $250 per hour.

Invoices contained a line item labeled “professional fees.” Only by requesting
additional details from the contractor during the audit did we identify the “on-site vs. off-
site” distinction. The OIG questions components of each category as described below.

On-Site Fees: The OIG concluded that the contractor’s routine practice of
charging a flat, on-site fee of $2,000 per day is not supported in the statement of work,
nor did we identify evidence that it was pre-approved by anyone at the FMC. Billing at a
flat rate resulted in a significant overpayment because on most visits, he did not work on
site for eight hours. For example, for the first 10 months of CY 2006, he billed the FMC
for 20 days at a rate of $2,000 per day. According to his work agendas, on only four of
those days did he work on site for eight hours. By billing at a daily rate, the contractor
was paid almost $7,000 more than he was entitled to under the terms of the SOW, as
shown below:

2006 Amount Billed Hours Worked OIG-Recalculated

January $4,000.00 11.25 $2,812.50
February 4,000.00 13.00 3,250.00
March 4,000.00 13.50 3,375.00
April 4,000.00 10.50 2,625.00
May 4,000.00 12.00 3,000.00
June 4,000.00 15.00 3,750.00
July 4,000.00 14.50 3,625.00
August 4,000.00 14.50 3,625.00
September 4,000.00 14.75 3,687.50
October 4,000.00 14.50 3,625.00

$40,000.00 $33,375.00

The OIG multiplied the actual hours the contractor was on site at scheduled
appointments by the $250 approved hourly rate to arrive at the recalculated fee.

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