Architect of the Capitol: Contracting Function Generally Follows Key Practices, but Certain Improvements Are Needed
Published: 2016-04-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The AOC is responsible for the maintenance, operation, and preservation of the buildings and grounds of the U.S. Capitol complex, which covers more than 17.4 million square feet in buildings and 587 acres of grounds. In fiscal year 2015, Congress appropriated $600.3 million to fund AOC's operations, over half of which was used to procure various goods and services ranging from large projects like the restoration of the Capitol Dome, to routine custodial services.
GAO was asked to review the AOC's contracting practices. This report examines (1) the extent to which the AOC has developed and implemented acquisition policies and processes to guide its contracting function, and (2) the tools used by the AOC to monitor and address contractor performance. GAO reviewed the AOC's acquisition policies, interviewed contracting officials, and reviewed a non-generalizable sample of 21 contracts and task or delivery orders with dollars obligated in fiscal years 2013 through 2015. The sample consists of a mix of high-value contracts for goods and services.
section_title: What GAO Found
paragraphs: The Architect of the Capitol (AOC) recently implemented a contracting manual that centralizes current law and regulations applicable to the AOC, as well as policies, orders and procedures. As a legislative branch agency, the AOC is not subject to the Federal Acquisition Regulation (FAR) which governs executive branch agencies; however, its manual draws on the FAR and covers topics central to the AOC's day-to-day contracting functions, such as acquisition planning, market research, and competition, all of which are key aspects of a sound acquisition process. In the 21 contracts and task orders GAO reviewed, AOC officials generally followed the policies in the contracting manual related to these critical functions—such as documenting justifications for the use of noncompetitive procedures.
The AOC began to collect competition data in fiscal year 2012, but the agency only conducts a limited assessment of its efforts to achieve competition. The AOC manual states it is agency policy to promote competition, and federal internal control standards state that agencies should establish mechanisms to track and assess performance against their objectives. While the AOC monitors data to track the number of sole-source contracts awarded, other analyses are limited. GAO's analysis of the AOC's data found that the agency competed approximately 50 percent of its contract obligations for the past 3 fiscal years—compared to 65 percent for the overall federal government. By examining the factors driving the number of sole-source awards or level of competition across different product types, AOC may be better positioned to identify where additional management attention may be needed to maximize competition.
The AOC uses a variety of approaches to monitor contractor performance on its projects, with contracting officers and their technical representatives being the primary officials responsible for providing oversight. The AOC uses a number of methods to address contractor performance problems, as shown in the figure below.
While the AOC has tools for addressing poor performance on specific contracts, it does not have a suspension and debarment process in place that could bar irresponsible contractors from working for the AOC or provide notice to other government agencies. Past GAO work has shown that having suspension and debarment procedures is critical to ensuring that the government only does business with responsible contractors.
section_title: What GAO Recommends
paragraphs: GAO recommends that AOC explore options for developing a more robust analysis of its competition levels and establish a suspension and debarment process suitable to its mission and structure. AOC agreed with GAO's findings and concurred with the two recommendations and noted it is taking steps to implement them.

section_title: Letter
paragraphs: The Architect of the Capitol (AOC) is responsible for the maintenance,  operation, and preservation of the buildings and grounds that make up  the U.S. Capitol complex. The entire complex consists of more than 17.4  million square feet of building space and more than 587 acres of grounds  and includes the U.S. Capitol, the House and Senate Office Buildings, the  Library of Congress, the Supreme Court, and U.S. Botanic Garden,  among other facilities. Contracting plays a central role in helping AOC  achieve its mission. In fiscal year 2015, AOC received $600.3 million to  fund its operations and over half of that was used to procure goods and  services to meet various needs. These procurements range from large  renovation projects like the restoration of the U.S. Capitol Dome and  Cannon House Office Building to meeting more routine needs, such as  maintenance and custodial services. As a legislative branch agency, the  AOC is not subject to the full array of acquisition laws and regulations  applicable to executive branch agencies such as the Federal Acquisition  Regulation (FAR).  You asked us to review AOC’s contracting procedures  and oversight of contractor performance. This report examines (1) the  extent to which AOC has developed and implemented acquisition policies  and processes to guide its contracting function, and (2) the tools used by  AOC to monitor and address contractor performance.
To examine AOC’s policies that guide its acquisition function, we  reviewed its contracting policies and procedures and compared them to  what is outlined in the FAR. While the FAR does not apply to AOC, it  reflects practices widely used throughout the executive branch of the  federal government. We focused our review on competition, acquisition  planning, and market research because our prior work has shown that  these activities are critical to building a strong foundation for successful  acquisition outcomes. To gain insight into the extent to which AOC is  awarding and implementing its contracts and task or delivery orders  consistent with its own internal policies and procedures, we used data  from AOC’s financial management system to select a non-generalizable  sample of 21 contracts and orders with obligations during fiscal years  2013 through 2015.  We chose contracts and orders from this timeframe  to allow us to gain insights into AOC’s recent contracting practices  including any changes or trends. The sample represents a mix of goods  and services including construction, engineering, and custodial services  for AOC projects of varying sizes. To assess the reliability of the data  from the AOC’s financial management system, we (1) reviewed  information about the data and the system that produced them, and (2)  compared certain data elements to information from the contract files we  sampled. Based on these steps, we determined that the data from AOC’s  financial management system were sufficiently reliable for the purposes  of this review. For the sample of 21 contracts and orders, we reviewed  applicable market research reports, acquisition plans, justifications and  approvals for sole-source awards to determine the extent to which AOC’s  practices were consistent with its guidance. We also met with contracting  officials responsible for these contracts to confirm our understanding of  information in the contract files. In addition, we interviewed AOC officials  from the Acquisition and Material Management Division (AMMD), who are  responsible for developing, implementing, and ensuring compliance with  AOC’s contracting policies and procedures. We also interviewed officials  from the Planning and Project Management division, which oversees  AOC capital planning and improvement efforts.
We used the same sample of 21 contracts and orders to determine how  AOC oversees contractor performance and resolves any disagreements  that may arise. We reviewed documentation in the contract files such as  relevant clauses, notices to comply, letters of concern, contractor  performance reports, and other key documents. We also reviewed AOC  contracting policies and project management guidance concerning  contractor performance. We interviewed officials from the Planning and  Project Management division, contracting officers, and contracting officer  technical representatives (COTR) to understand how they ensure  compliance with the terms of contracts and resolve disagreements that  may arise. In addition, we spoke with representatives from the AOC’s  operational units to obtain their views on the acquisition function.  A more  detailed description of our scope and methodology is presented in  appendix I.
We conducted this performance audit from April 2015 to April 2016 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 findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The AOC’s authority to contract for goods and services is vested by  statute in the agency head who has delegated this responsibility to the  Chief Administrative Officer (CAO). The CAO has responsibility to,  among other things, administer the procurement function on behalf of  AOC. AMMD, which falls under the CAO, is authorized to enter into  contracts on behalf of the agency. AMMD is the primary office responsible  for developing contracting policies and procedures, appointing contracting  officers, and awarding and overseeing contracts. Requirements for goods  and services are identified by AOC’s operational units, which consist of  various jurisdictions and offices that handle the day-to-day operations  including the support, maintenance, and operations of buildings as well as  construction and renovation projects.  While AMMD has the primary  responsibility of awarding and administering contracts, AMMD often  works with the AOC’s jurisdictions and offices to assist in monitoring the  progress of contracts awarded to support AOC’s various projects, such as  the restoration of the Capitol Dome.
From fiscal years 2011 through 2015, AOC obligated, on average, $326  million annually to procure goods and services. During the 5-year period,  as figure 1 shows, the level of contracting actions has generally declined  while obligations on contracts and orders varied. There was a substantial  increase in obligations between fiscal years 2014 and 2015 when AOC  awarded a contract to begin construction for the Cannon building renewal  project.
The vast majority of AOC’s spending to procure goods and services  stems from the agency’s jurisdictions listed below in figure 2. Among the  jurisdictions, the Capitol Power Plant and the House Office Buildings  collectively accounted for 55 percent of AOC’s fiscal year 2015 contract  obligations.
As a legislative branch agency, AOC is subject to some but not all of the  procurement laws applicable to government agencies. For example, both  AOC and executive branch agencies are subject to the Buy American Act  and the Contracts Disputes Act of 1978.  Additionally, in some instances  AOC has adopted certain procurement policies and regulations it would  not otherwise be subject to. For example, although not subject to the  Small Business Act, AOC worked with the Small Business Administration  to establish a small business subcontracting and set-aside program to  help the AOC more fully utilize small businesses. In addition, AOC has  adopted certain characteristics and clauses of the FAR. For example,  AOC incorporates FAR clauses related to contract changes, inspections,  differing site conditions, availability of funds, and terminations. According  to AOC officials, incorporating FAR clauses into AOC contracts offers  significant benefits because the contract clauses have been drafted and  reviewed by subject matter experts across the government and are  familiar to government contractors. According to AOC officials, federal  case law is usually available to address any contract interpretation issues.
subsections: section_title: Key Building Blocks for Successful Acquisition Outcomes
paragraphs: Our previous work has shown that acquisition planning, market research,  and competition are key foundations for successful acquisition  outcomes. Acquisition planning is the process by which agencies  establish requirements and develop a plan to meet those requirements.  Generally, project and contracting officials share responsibility for  acquisition planning activities intended to produce a comprehensive plan  for fulfilling the agency’s needs in a timely manner and at a reasonable  cost. Our past work has found that acquisition planning is strengthened  by documenting decisions to guide existing acquisitions and capturing  important lessons and other considerations that can be used to inform  future procurements. Market research is the process of collecting and  analyzing data about capabilities in the market that could satisfy an  agency’s needs. It is a critical step in informing decisions about how best  to acquire goods and services. Effective market research can help  agencies determine the availability of vendors to satisfy requirements and  improve the government’s ability to negotiate fair and reasonable prices.  Competition is the cornerstone of a sound acquisition process and a  critical tool for achieving the best return on investment for taxpayers.
Using full and open competitive procedures to award contracts means  that all responsible contractors are permitted to submit offers. The  benefits of competition in acquiring goods and services from the private  sector are well established. Competitive contracts can help save taxpayer  money, conserve scarce resources, improve contractor performance,  curb fraud, and promote accountability for results.
section_title: AOC Has Implemented Contracting Guidelines, but Efforts to Assess Competition Could Be Enhanced
paragraphs: AOC developed a contracting manual to provide guidance for agency  officials responsible for purchasing goods and services. The manual was  implemented in April 2014 and includes guidelines on topics similar to  those included in the FAR. AOC’s contracting manual outlines procedures  and guidance for acquisition planning, market research, and competition.  In general, for the 21 contracts and orders we reviewed, AOC officials  implemented procedures related to these critical functions, such as  documenting justifications for the use of noncompetitive procedures, in a  manner consistent with the manual. AOC has identified competition as a  key objective, and the agency tracks the number of sole-source awards  and percentage of dollars obligated under sole-source awards. However,  the agency conducts limited analysis of the factors driving the number of  sole-source awards or the level of competition achieved across different  product types. Such analysis could help identify where additional  management attention may be needed to maximize competition to the  fullest extent.
subsections: section_title: AOC Has Developed Contracting Practices
paragraphs: In 2014, AOC issued a contracting manual that incorporates statutes and  federal regulations applicable to the AOC, as well as internal policies in  order to provide uniform policies across the agency and guidance to  personnel. The AOC Inspector General had previously found that while  AOC had developed procurement policies, orders, and procedures, they  were not consolidated in one location, which made it difficult for AOC staff  to access. The manual covers topics central to AOC day-to-day  contracting functions, such as acquisition planning, market research, and  competition, all of which we have previously found to be key aspects of a  sound acquisition process.
subsections: section_title: Acquisition Planning
paragraphs: AOC started requiring written acquisition plans in August 2012,  approximately 18 months prior to the publication of the contracting  manual. Though AOC staff engaged in acquisition planning to inform  procurement decisions before August 2012, plans were not consistently  documented, according to contracting officers. Further, AMMD officials  stated that another reason they started requiring acquisition plans was to  help enforce acquisition timeframes agreed upon by the office that  needed the acquisition and contracting officers. According to officials, the  requiring offices consistently missed important deadlines, oftentimes  resulting in lengthy acquisition cycles.  As a result, AMMD implemented  the requirement for written acquisition plans to help alleviate this problem.  AMMD officials believe that requiring written acquisition plans has helped  shorten acquisition timeframes. AOC developed a template to assist staff  in preparing written acquisition plans which, in turn, helps to ensure key  information is considered and captured for each acquisition. AMMD  officials are considering options to revise the template staff use to  document acquisition plans so that it is more adaptable to the specific  circumstances of a procurement. As shown in table 1, the AOC manual  shares some common acquisition planning principles with the FAR.
On all the contracts and orders we reviewed, we found that the AOC  conducted acquisition planning. AOC’s practices generally met the  agency’s requirements for acquisition planning, including preparing  written acquisition plans, addressing the prospects for competition, and  involving the appropriate stakeholders in the planning process, among  other things. Of the 21 contracts and orders that we reviewed, seven files  required written acquisition plans, based on the dollar threshold outlined  in the contracting manual, as well as timing of the requirement, and five of  those seven files had written acquisition plans. For the remaining two files  that required acquisition plans, AMMD officials cited an administrative  oversight and a requirement to use a mandatory service provider as the  reasons for not preparing a written acquisition plan. In addition, we found  that two other files contained written acquisition plans even though they  were not required. The contracting officer on one of those projects, the  Refrigeration Plant Revitalization project, stated that while not required, a  written acquisition plan was completed due to the cost, complexity, and  visibility of the project. The AOC’s contracting manual requires that a  written plan be completed well in advance of when an acquisition is  needed but does not establish timeframes for how far in advance  acquisition plans should be completed. AMMD officials noted that the  nature and complexity of the acquisition—such as a new or recurring  requirement—determines the extent of advance preparation needed to  develop the acquisition plan. As a result, AOC did not establish specific  timeframes in the contracting manual.
section_title: Market Research
paragraphs: As shown in table 2, AOC has implemented market research policies in  its manual that shares some common principles with the FAR.
In our review of AOC practices, we found that they generally met the  requirements to conduct and document market research activity. We  found that AOC employs a number of different ways of conducting market  research that reflect what is in the contracting manual. For instance, AOC  will often invite vendors to a potential construction worksite before  publicizing a solicitation. This helps AOC identify potential qualified  vendors and also allows vendors an opportunity to learn more about the  requirement and determine if they want to make an offer on a project. We  found that AOC held industry days for 5 of the 21 contracts and orders we  reviewed for projects such as the Cannon Renewal project, the Dome  Restoration project and the replacement of the skylight in the Hart  Building, among others. Another example of market research that AOC  performed was the use of a “sources sought” notification to determine the  capabilities of the marketplace. For the 21 contracts and orders in our  sample, we found that market research was documented in different  ways. For instance, if a contract had an acquisition plan associated with  it, the market research performed for that requirement would be  documented in the acquisition plan. Additionally, we found contracting  officers would document what research was performed and the results of  those searches in memoranda contained in the contract files.
AMMD officials stated that they are taking action to improve the quality of  market research conducted, which is typically performed by the requiring  office.  AMMD plans to provide market research training in 2016 to  enhance staff’s knowledge of how to conduct and document effective  market research. AOC’s market research training is expected to focus on  documenting market research, using a standardized template to capture  the steps taken, and results of market research efforts.
section_title: Competition
paragraphs: AOC’s contracting manual promotes full and open competition in the  procurement process. Under full and open competition all responsible  suppliers are provided an opportunity to compete for the agency’s  contracts.  AOC’s manual shares some common competition principles  with the FAR as highlighted in table 3.
Within our sample of contracts and orders, we found that AOC generally  met its competition requirements as provided for in the agency’s  contracting manual.  Ten of the 21 contracts and orders we reviewed  were competed and received more than one offer. In our previous work,  we have reported that competitions that yield only one offer in response  to a solicitation deprive agencies of the ability to consider alternative  solutions in a reasoned and structured manner. All 11 of the non- competed contracts and orders we reviewed were awarded using non- competitive procedures based on exceptions cited in the AOC contracting  manual. Specifically,
Two contracts for janitorial services were awarded without full and  open competition because of statutory provisions requiring that  agencies use a list of specified providers for these services.
Three task orders were awarded under base contracts that had  originally been competed. In these three cases, since the original  base contracts were awarded to only one vendor, any task order  awarded under the base contracts is not required to be competed.
Four contracts were awarded non-competitively because only one  supplier was available.  For example, when AOC was seeking to  award a contract for the audio listening systems used as part of  guided tours at the Capitol Visitor Center, AOC evaluated three  vendors and determined that it was more cost effective and a better  value to the government to maintain and replace the existing brand of  listening devices instead of purchasing a new system.
One contract was awarded non-competitively to develop continuity of  operations plans in case of emergencies. The justification stated that  open competition would publicly reveal sensitive information that  could pose a security risk. As a result, AOC awarded the contract to a  firm that had been used previously in order to limit the number of  individuals with access to information on security risks and  vulnerabilities.
One contract to provide construction administration services, such as  field observations, was awarded to the company that had designed  and prepared all drawings and specifications for the project. The AOC  believed that this company had the requisite technical expertise and  therefore was in a unique position to provide the necessary  evaluations and review of the documents.
section_title: AOC Assessment of its Competition Efforts Could Be Enhanced
paragraphs: AOC has taken steps to gauge its effectiveness in implementing the  agency’s policy to promote competition in the procurement process;  however, currently it conducts limited analysis in this area. AOC  leadership considers competition to be a key priority for the agency. The  AOC contracting manual also emphasizes the importance of competition  and recognizes market research as a means to evaluate competition. Our  analysis of AOC procurement data showed that the agency competed  approximately 50 percent of its contract obligations for the past 3 fiscal  years—compared to 65 percent for the federal government overall.
Federal internal control standards call for agencies to establish  mechanisms to track and assess performance against their objectives.   In addition, our prior work has shown that for policies and processes to be  effective, they must be accompanied by controls and incentives to ensure  they are translated into practice. The AOC began to collect competition  data in fiscal year 2012.  AOC has implemented mechanisms to track  data on the number of non-competed awards and dollars obligated. In  addition, AOC tracks competition levels across its organizational units as  well as the agency’s use of allowable exceptions to competition. For  example, AOC’s data shows that in fiscal year 2015, the primary basis for  awarding noncompetitive contracts was the only one responsible source  exception to competition—meaning that only one vendor could fulfill the  requirement. While this is a good first step to gaining insight into the  agency’s competition efforts, additional analyses could provide key  information that highlights trends in AOC’s overall competition levels, the  factors driving the use of the only one responsible source exception such  as the quality of AOC’s market research, the types of goods and services  that AOC is most successful in competing, and areas where focused  attention may be needed. AOC officials did not dispute the value of  further analyzing data about the agency’s competition efforts, but noted  they have not previously identified the need to conduct analyses beyond  their current efforts.
Tracking competition data instills accountability at all levels and ensures  that AOC leadership has the information readily available to make  decisions rather than rely on ad hoc means. Routinely tracking its  procurements at a more granular level—such as competition across  goods and services—also would provide AOC leadership with important  information to identify successful competition strategies that can be  replicated across the agency and help the agency focus its resources to  maximize competition.
section_title: AOC Uses a Variety of Approaches to Monitor Contractor Performance, but Does Not Have Suspension and Debarment Procedures
paragraphs: AOC uses various approaches to monitor contractors’ progress and work  quality and address contractor performance, but does not have  suspension and debarment procedures. AOC, like other agencies,  primarily relies on contracting officers and COTRs who use oversight  tools such as inspection reports and periodic progress meetings to  monitor contracts. When AOC identifies contractor performance problems  using these tools, AOC has a variety of approaches at its disposal to help  address performance issues, such as providing written notice to the  contractor highlighting the problem and seeking action to address the  performance issue. If a contractor does not take action to improve  performance, AOC may then invoke a number of contractual provisions  including the collection of liquidated damages from the contractor.  Although AOC has tools and resources at its disposal to manage and  correct deficiencies on a contract-by-contract basis, AOC does not have a  suspension and debarment process that allows it to exclude an individual  or firm from receiving future AOC contracts.
subsections: section_title: AOC Uses a Variety of Approaches to Monitor Contractor Performance And Address Performance Issues
paragraphs: AOC uses a number of oversight tools to monitor contractor performance  and protect the government against substandard work from the  contractor. AOC’s monitoring approaches are generally applicable to all  the agency’s projects. Depending on the type of project and severity of  the deficiency, AOC may employ some or all approaches in any  sequence it deems appropriate to seek immediate remedies or damages.  As described below, across our sample of contracts and orders, we  observed AOC’s use of a variety of approaches, including oversight tools,  performance communications and some of the available contractual  provisions to monitor and address contractor performance, as shown in  figure 3.
Tools identified by AOC officials to oversee contracts include onsite  representatives, daily progress reports, inspection reports, and progress  meetings, as described in table 4. These oversight tools can help AOC  identify instances of poor workmanship, safety issues, or timeliness  problems, among other things. the contractor at a progress meeting and  requested a recovery plan.
June-August 2014: AOC issued 2 letters  of concern due to continued schedule  delays and overall project management  concerns.
January 2015: AOC gave the contractor  a negative interim performance rating  related to schedule and management  areas to emphasize the importance of the  situation. resolved through routine communication, AOC may then issue a  notice to comply to the contractor, which formally notifies a contractor  that it is not complying with one or more contract provisions. Based on  our review, these notices are generally issued by the COTR, lay out  the specific performance concern or contract compliance issue, and  request corrective action by the contractor within a specified time  frame. AOC may issue multiple notices on the same matter before it is  fully addressed. The notice to comply does not always indicate a  performance problem but could also be issued for noncompliance with  administrative contract requirements, such as failure to submit  progress reports. The 53 notices to comply that we reviewed from our  sample of contracts and orders typically addressed safety, work  quality, or administrative contract compliance concerns. superintendent was replaced among other  actions, and performance improved  significantly, recovering lost time.
October 2015: AOC gave the contractor  a more favorable interim performance  rating in these two areas in recognition of  the improvement.
Letter of Concern: If performance issues are not resolved through  routine communication or notices to comply, AOC officials said the  agency may then issue a letter of concern to a contractor. Based on  our review, letters of concern are very similar to notices to comply, as  they typically lay out a specific concern and request corrective action  within a specified time frame. The main difference between a notice  and letter is that letters are issued by the contracting officer instead of  the COTR. The 27 AOC letters that we reviewed also addressed  many of the same types of issues as notices to comply—safety, work  quality, and personnel or schedule concerns.
Contractor Performance Assessments: AOC routinely assesses  contractor performance on an interim and final basis in government- wide contractor performance systems, and the ratings are available to  other federal agencies through the Past Performance Information  Retrieval System. In completing past performance evaluations, AOC  officials rate the contractor on various elements such as the quality of  the product or service delivered, schedule timeliness, and cost  control. AOC officials said that contractor performance assessments  are one of the most valuable methods available to incentivize a  contractor to improve performance because a negative assessment  could limit the contractor’s ability to be awarded future contracts from  AOC or other federal agencies.
subsections: section_title: Contractual Provisions
paragraphs: AOC also has a variety of contractual provisions it can invoke if it  determines that a contractor has failed to meet some or all of its  contractual requirements.  For example, certain provisions allow AOC to  seek damages from poorly performing contractors.
Contract Disputes: The Contract Disputes Act of 1978 outlines the  process for resolving disputes between a contractor and the  government. AOC policy calls for seeking an amicable resolution  before invoking procedures identified in the Contract Disputes Act.  When all attempts to settle the dispute amicably fail, AOC must issue  a contracting officer’s final decision on the matter. All of the contracts  we reviewed included the relevant contract clause that sets forth this  process for resolving disputes. However, none of the contracts that  we reviewed involved a dispute between the contractor and the  government that required invoking the processes laid out by the  disputes clause.
Liquidated Damages:  To protect itself from construction delays, the  AOC contracting manual requires that all construction contracts  valued over $50,000 include a liquidated damages clause. The  liquidated damages clause provides that if the contractor fails to  complete the work within the time specified in the contract, the  contractor pays the government a daily fixed amount for each day of  delay until the work is completed or accepted. According to its  guidance, AOC generally determines the daily fixed amount based on  the dollar value of the contract. For the 7 construction contracts in our  sample that met the applicable threshold for liquidated damages, daily  rates ranged from $200 a day to $28,201 a day. However, AOC had  not invoked the clause for any of these contracts. Further, Congress  recently enacted legislation prohibiting the AOC from using funds  made available by the Consolidated Appropriations Act, 2016, to  make incentive or award payments to contractors for work on  contracts that are behind schedule or over budget, unless certain  determinations are made.
Termination for Default: When poor contractor performance cannot  be corrected through other means, AOC may take additional steps  and ultimately terminate the contract for default. AOC would start the  process using either a cure notice or a show-cause notice. A cure  notice provides the contractor typically at least 10 days to correct the  issues identified in the notice or otherwise fulfill the requirements. A  show-cause notice notifies the prime contractor that the AOC intends  to terminate for default unless the contractor can show cause why  they should not be terminated. Typically, a show-cause notice calls  the contractor’s attention to the contractual liabilities, if the contract is  terminated for default. None of the contracts in our sample resulted in  a cure notice or show-cause notice; however, AOC officials said that  these have been used in a couple of instances from fiscal years 2013  through 2015. For example, AOC issued a cure notice in 2013 to a  contractor due to repeated poor quality control that delayed progress  on the project. The cure notice followed repeated attempts by AOC to  address the issues with the contractor through other methods,  including issuing five letters of concern in the 6-month period leading  up to the cure notice.
section_title: AOC Does Not Have a Suspension and Debarment Process
paragraphs: AOC currently has no agency-wide process for suspending or debarring  individuals or firms that the agency has determined lack the qualities that  characterize a responsible contractor.  In the absence of such a process,  AOC does not have a mechanism that allows it to determine in advance  of a particular procurement that an individual or firm lacks present  responsibility and therefore should not receive AOC contracts.
The FAR and the AOC contracting manual provide that contracts should  be awarded only to individuals or firms that are responsible prospective  contractors.  A responsible contractor is one that has the financing,  workforce, equipment, experience and other attributes needed to perform  the contract successfully.  Similar to executive branch agencies,  contracting officers at AOC are required to review these factors prior to  the award of any contract.  In addition, contracting officers must review  the excluded parties list in the governmentwide System for Award  Management (SAM), which is maintained by the General Services  Administration, to determine whether the contractor in line for an award  has been suspended, debarred, or proposed for debarment by any other  agency.  A suspension temporarily disqualifies a contractor from federal  contracting while a debarment excludes a contractor for a fixed period,  generally up to 3 years. Although AOC officials must check the list of  excluded parties in SAM, and as a matter of policy AOC declines to  award contracts to excluded firms or individuals, AOC has no procedure  for taking its own suspension or debarment actions or adding firms to the  list of excluded parties.
Our prior work has found that there are several agencies, like AOC, that  lack an effective suspension and debarment process.  In August 2011, we  reported that six executive branch agencies had not taken any  suspension or debarment actions within the past 5 years despite  spending significant amounts of appropriated funds buying goods and  services.  By contrast, four other agencies had active suspension and  debarment programs, and we identified three factors that these agencies  had in common. First, these four agencies had detailed suspension and  debarment policies and procedures.  Second, they had identified specific  staff responsible for the function.  And third, they had an active process  for referring matters that might lead to a suspension or debarment to the  appropriate agency official.
Consistent with the findings from our prior work, in a September 2012  management letter, the AOC Inspector General proposed that AOC  develop a suspension and debarment process as a means to deal with  “unscrupulous or ineffective contractors.” According to AOC officials, the  agency declined to implement that recommendation, largely because  without being subject to the FAR, AOC believed it could only debar  contractors from doing business with AOC, and it was thought that the  small number of actions anticipated would likely not justify the cost of  developing a new process. However, we do not believe that this is a  convincing reason. GAO, which is also a legislative branch agency,  established a suspension and debarment process in 2012. For our  process, we follow the policies and procedures on debarment and  suspension contained in the FAR. Our process identifies new roles and  responsibilities for existing offices and officials within the agency. As part  of our process, we would report on the list of excluded parties, the names  of all contractors we have debarred, suspended, or proposed for  debarment. Although debarment, suspension, or proposed debarment of  a contractor taken by GAO would have mandatory application only to  GAO, listing a contractor on the excluded parties list provides an  indication to other federal agencies that they need to thoroughly assess  whether the contractor is sufficiently responsible to be solicited or  awarded a contract. In addition, one of the advantages of a suspension  and debarment process is that an agency can address issues of  contractor responsibility and provide the agency and contractors with a  formal process to follow. When we shared our experience with them,  officials at AOC did not identify any reasons why a similar approach could  not be taken at their agency.
section_title: Conclusions
paragraphs: With more than half of AOC’s budget authority currently being spent on  contracting, acquisition clearly plays a central role in achieving AOC’s  mission. AOC has taken initial steps to establish an efficient and effective  acquisition function by issuing the AOC contracting manual. The manual  will help promote full and open competition in AOC’s procurement  process. AOC is taking action to improve the quality of its market  research which, in turn, can help enhance competition. The agency only  recently started to collect competition data to inform its progress, but AOC  is not fully using these data to determine the extent of its overall  competition efforts and identify areas where additional focus is needed to  ensure the agency is obtaining competition to the maximum extent  possible. AOC is using several tools to provide oversight and hold  contractors accountable; however, it lacks suspension and debarment  processes that could help further protect the federal government’s  interests. Given the high-profile nature of AOC’s mission, because of the  congressional clients AOC serves, and the buildings it is responsible for,  such a process would help to ensure that contracts are awarded only to  responsible sources. Implementing policies and procedures for  suspension and debarment would build upon AOC’s existing  accountability framework and would further foster an environment that  seeks to hold the entities they deal with accountable.
section_title: Recommendations for Executive Action
paragraphs: To further enhance the acquisition function, we recommend that the  Architect of the Capitol take the following two actions:
Explore options for developing a more robust analysis of AOC’s  competition levels, including areas such as the trends in competition  over time, the use of market research to enhance competition, and the  types of goods and services for which competition could be increased;
Establish a process for suspensions and debarments that is suitable  for the AOC’s mission and organizational structure, focusing on  policies, staff responsibilities, and a referral process.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to AOC for review and comment. AOC  provided written comments on the draft, which are reprinted in appendix  II. AOC agreed with our findings, concurred with our recommendations  and noted it is taking steps to implement them. We also received  technical comments from AOC, which we incorporated throughout our  report as appropriate.
We are sending copies of this report to the appropriate congressional  committees and to the Architect of the Capitol. This report will also be  available at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or by e-mail at woodsw@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Staff who made key contributions  to this report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to assess (1) the extent to which AOC has developed  and implemented acquisition policies and processes to guide its  contracting function, and (2) the tools used by AOC to monitor and  address contractor performance.
To address these objectives, we used data from AOC’s financial  management system to identify contracts and orders with obligations  during fiscal years 2013 through 2015. We selected a non-generalizable  sample of 21 contracts and orders, during this timeframe to obtain  insights into AOC’s recent contracting practices. To narrow our focus on  which contracts to include in our review, we identified contract actions for  AOC’s largest and most complex projects, which the AOC defines as any  project estimated to cost $50 million or more over the life of the project— the Cannon House Office Building Renewal Project, Cogeneration Plant  Project, Capitol Dome Restoration Project, and the Refrigeration Plant  Revitalization Project. As Table 2 below shows, the sample represents a  mix of large and small dollar awards and types of products and services  procured to support various projects across AOC.
We excluded any transaction related to real estate rental or electric power  payments. We assessed the reliability of AOC’s financial management  system data by (1) reviewing existing information about the data and the  system that produced them, and (2) comparing reported data to  information from the contract files we sampled. Based on these steps, we  determined that the data obtained from AOC’s financial management  system were sufficiently reliable for the purposes of this review.
To examine AOC’s policies that guide its acquisition function, we  reviewed its contracting policies and procedures and compared them to  what is outlined in the Federal Acquisition Regulation (FAR). While the  FAR does not apply to the AOC, it reflects practices widely used  throughout the executive branch of the federal government. We focused  our review on competition, acquisition planning, and market research as  our prior work has shown that these activities are critical to building a  strong foundation for successful acquisition outcomes. We reviewed prior  GAO reports to identify generally accepted contract management  practices for market research, acquisition planning, and competition. We  reviewed market research reports, acquisition plans, justifications and  approvals for sole-source awards, solicitations, and independent  government cost estimates for the contracts and orders in the sample.  We analyzed these documents to determine the extent to which  acquisition planning and market research was consistent with AOC’s  guidance. To supplement information obtained from contract files within  our sample, we met with contracting officers and contracting officer  technical representatives to confirm our understanding of information in  the contract files. We also interviewed officials from the Acquisition and  Material Management Division on the policies and procedures that guide  the acquisition function.
To provide insights about the extent to which AOC competes contracts it  awards, we used procurement data from AOC’s financial management  system for fiscal years 2013 through 2015 to calculate its competition  rate. Unlike other federal agencies, AOC does not report its procurement  data to the Federal Procurement Data System-Next Generation (FPDS- NG), which is the government’s procurement database. To provide a  basis of comparison, we calculated the governmentwide competition rate  using data from FPDS-NG. For both AOC and governmentwide, we  calculated the competition rate as the total dollars obligated annually on  competitive contract actions as a percentage of total dollars obligated on  all contract actions during fiscal years 2013 through 2015. This includes  obligations on new contracts, orders, and modifications of existing  contracts. Typically, FPDS-NG codes task and delivery orders from  competitive single-award contracts as also being competed. In contrast,  AOC classifies task and delivery orders derived from a competed single  award contract as not competed even though the base contract was  competed. In contrast, AOC classifies task and delivery orders derived  from a competed single award contract as not competed because the  orders are not available for competition, according to an AOC official. We  adopted AOC’s classification of these orders as not competed. As a  result, our determination of AOC’s competition rate may be understated.  However, AOC and GAO officials agreed the difference is likely not  substantial given the small number of single award contracts at AOC. We  compared AOC’s efforts to assess its competition levels against  acquisition best practices and Standards for Internal Control in the  Federal Government, which call for continually tracking spending to gain  insight about how resources are being used and using the information to  assess how agency’s objectives are being achieved.
To determine how the AOC oversees contractor performance, we  reviewed the same sample of 21 contracts and orders, reviewed AOC  project management guidance, and interviewed relevant officials.  Specifically, we used the sample to gain insight into how AOC oversees  contractor performance and resolves any disagreements that may arise  during the performance of the contract. We reviewed documentation in  the files such as relevant clauses, notices to comply, letters of concern,  contractor performance reports, and other key documents used for  monitoring and compliance purposes. We also reviewed AOC contracting  policies and project management guidance on how the AOC monitors  contractor performance. In addition, we reviewed prior GAO work to  identify tools available to agencies to monitor and take actions to address  or correct deficiencies regarding contractor performance. We also  interviewed AOC contracting officials and contracting officer’s technical  representative about their experiences in monitoring contractor  performance. We interviewed officials from the Planning and Project  Management division, contracting officers, and contracting officer  technical representatives to understand how they ensure compliance with  the terms of contracts and resolve disagreements that may arise. We  reviewed AOC’s contracting procedures to determine whether AOC had a  process in place to address contractor performance and ensure it  engages with responsible contractors and used previous GAO work on  suspension and debarment as the basis for assessing AOC’s efforts.
We conducted this performance audit from April 2015 to April 2016 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 findings and  conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Architect of the Capitol
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Candice Wright (Assistant  Director); Emily Bond; Lorraine R. Ettaro; Victoria C. Klepacz; Julia  Kennon; Katherine S. Lenane; Jose A. Ramos; Beth Reed Fritts; Roxanna  Sun; and Alyssa Weir also made key contributions to this report.