In response to public concerns about safety and maintenance, the District of Columbia undertook a major effort to renovate and modernize its public schools in 1998. It has budgeted $1.3 billion for the renovations from fiscal year 1998 through 2007. The school system began this effort by entering into a Memorandum of Agreement with the Army Corps of Engineers. The agreement was for engineering, procurement, and technical assistance to ensure that construction contracts were awarded and managed so that schools could open in the fall of that year. In the Fiscal Year 1999 District of Columbia Appropriations Act, Congress authorized the Corps of Engineers to provide the school system with engineering, construction, and related services. Until fiscal year 2001, the District of Columbia’s Office of Contracting and Procurement was the central authority for procurements made by the various city agencies, including the school system. In October 2000, the school system obtained its own procurement authority. It assumed responsibility for about a third of the school renovation projects on the fiscal year 2001 capital projects list, while the Corps of Engineers was responsible for the remainder. To obtain renovation services for the repairs under its purview, the school system has almost exclusively used a GSA areawide public utility contract with Washington Gas for gas, gas transportation, and energy management services. GSA entered into the contract with Washington Gas, a regulated public utility, without competition because the company has an exclusive franchise by law to provide certain utility services in its service area. The “energy management” services available from the contract could, if the contractor has these services on file with the Public Service Commission, include services intended to provide energy savings, efficiency improvements, energy audits, conservation measures such as lighting control and boiler control improvements, and water conservation device installation. The school system improperly used the gas utility contract as a vehicle for obtaining a broad range of facility improvements and maintenance work. In doing so, it precluded competition by awarding all of the work on a sole-source basis to Washington Gas as the prime contractor. The types of services provided under the Washington Gas contract could have been performed by licensed plumbing, heating, electrical, or general contractor firms. The GSA contract with Washington Gas is limited to the provision of regulated gas utility and energy management services. In contrast, our analysis of completed projects from August 2000 through March 2001 shows that the school system has paid Washington Gas $25 million for a range of projects, including painting, carpeting, and electrical work; boiler, air conditioning, heating, and structural repairs; bathroom, auditorium, and swimming pool renovations; and flag pole refurbishments. Figure 1 shows the major categories of services. Based on our reading of the contract, the governing regulation, and discussions with GSA and the District of Columbia Public Service Commission, we do not believe these services were within the scope of the GSA contract because none of the work or services were regulated utility services or otherwise on file with the Public Service Commission. Appendix V contains details on our analysis. The school system first started using the GSA areawide contract with Washington Gas in the last months of calendar year 1997 to provide emergency boiler repairs and temporary boiler rentals. These services were outside the scope of utility services described in the contract. In 2000 and 2001, the range of services expanded to include many other types of projects ordered by the school system, all of which were also outside the contract’s scope. Washington Gas marketed its project management services to the school system and performed these services without regard to the scope of its contract with GSA. The school system’s chief contracting officer explained to us that the Washington Gas contract was used because it was an existing source of supply that could be quickly implemented to keep the schools open. In contrast, according to the contracting officer, the typical lengthy procurement process using solicited competitive bids would have prevented the timely acquisition of the needed work and services. The contracting officer considered the GSA contract to be available for use because the type of work was, in the contracting officer’s view, energy- related. Other contracting options were available to the school system. For example, the school system could have used the Army Corps of Engineers to perform school renovations. The Corps carried out most of the renovation work for the school system from fiscal years 1999 through 2001. Further, the Corps had alternative contract vehicles for which it had well-defined statements of work, independent cost estimates, and negotiated contractor fees. The then-Chief Facilities Officer informed us that he was reluctant to give additional work to the Corps, however, because he believed the Corps processes and procedures were too slow given the crisis atmosphere and pressure from the community to carry out renovations quickly. After we raised questions about the school system’s use of the Washington Gas contract, the GSA contracting officer responsible for the contract sent a May 2001 letter to the school system’s contracting officer stating that (1) the contract is not intended to provide general facility improvements and maintenance that are not energy-related and (2) continued use of the contract for services outside the scope and intent would jeopardize the school system’s ability to continue using the contract. The GSA contracting officer was unaware of the scope of services for which the school system was contracting with Washington Gas because neither the school system nor Washington Gas had reported use of the contract to GSA as required. An Assistant General Counsel at the General Services Administration also told us that many of the construction services provided by Washington Gas to the school system clearly fell outside the scope of the areawide contract because these services dealt with general construction as opposed to gas, gas transportation, or energy management services. Further, the Counsel explained that energy management services must result in documented energy cost savings or a reduction in energy usage. To ensure that the contract is properly used in the future, the GSA contracting officer referred the school system’s contracting officer to GSA guidance on areawide utility contracts. However, we believe this guidance in insufficient and unclear. For example, the guidance could be interpreted as allowing the school system to order any service Washington Gas, or more precisely, its subsidiaries and subcontractors, might have to offer. It also lists many energy management projects that are not regulated utility services that could be provided under areawide contracts, such as window and air conditioning replacements. We are sending a separate letter to GSA detailing our concerns with its guidance and providing recommendations on improving oversight and guidance on areawide utility contracts. Our review also revealed serious breakdowns in internal controls and gross shortcomings in the way the work under the gas utility contract was ordered and handled. The school system failed to adhere to review and oversight requirements. School system personnel inappropriately chose a select group of subcontractors to perform the work. The school system did not take steps to obtain fair and reasonable prices and failed to perform adequate and effective contract administration. The absence of effective controls and oversight has put the $32.9 million already spent on the renovation work—as well as some $10.2 million in outstanding orders—at considerable risk of improper billing, poor quality work, and high prices. Establishing and following strong management and oversight practices is critical to successful contracting efforts. To ensure that they get the best deal possible agencies should fully consider risks as well as alternative solutions. They generally should compete the work they want done. In noncompetitive contracting situations, particular care needs to be taken to ensure fair and reasonable prices. Moreover, once a contract is awarded, agencies need to take steps to effectively oversee their contractors. For example, they should have effective plans for assuring the quality of the work performed by the contractor. When these controls are not in place, agencies assume undue risk and could end up paying more than they should. The District of Columbia has controls in place to ensure that it obtains fair and reasonable prices and to provide contract oversight. For example, District agencies are required to perform procurement planning and conduct market surveys to promote and provide for competition for supplies and services. In addition, until fiscal year 2001, the District of Columbia’s Office of Contracting and Procurement was required to review contracting actions (including the school system’s) totaling $50,000 or more. Currently, the school system’s Office of General Counsel is required to review contract actions of $25,000 or more. Among other things, these reviews require evidence that independent cost estimates have been performed, work has been competed or justified as a sole-source procurement, and a legal review has been performed. The school system did not adhere to a number of oversight requirements in carrying out the renovation work. Such requirements are in place to ensure that the District obtains the best price and service, contracts are legally sound, payments to contractors are justified, and work has adequately been competed. Specifically: The school system did not obtain required reviews and approvals from the District of Columbia’s Office of Contracting and Procurement. When the school system began using the Washington Gas contract, it had not yet been granted it own contracting authority. As such, it was required to submit actions totaling $50,000 or more to the Office of Contracting and Procurement up until October 2000. This review considered such things as the cost of the work, whether the contract was legally sound, whether the work was competed, and whether sole-source procurements were adequately justified. However, only 2 of 20 actions that were subject to this review—representing $1.3 million of $14.9 million—were submitted. The school system did not obtain required approvals from its General Counsel. When the school system obtained its contracting authority in October 2000, the school system’s guidance required contract actions totaling $25,000 or more to be submitted to the General Counsel for review and approval. However, the contracting officer ignored this requirement and did not submit $28.2 million of orders that met this review threshold. General Counsel officials told us that they were unaware of the extent to which the school system was using the Washington Gas contract. The school system bypassed the City Council approval process.