oversight

Review of Formation Issues Regarding the Department of Education's Fiscal Year 2003 Contract with Ketchum, Inc. for Media Relations Services.

Published by the Department of Education, Office of Inspector General on 2005-04-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

  Review of Formation Issues Regarding the Department of
  Education’s Fiscal Year 2003 Contract with Ketchum, Inc.
                for Media Relations Services


                                            FINAL REPORT




                                            ED-OIG/A19-F0007
                                               April 2005




Our mission is to promote the efficiency,                      U.S. Department of Education
effectiveness, and integrity of the                            Office of Inspector General
Department’s programs and operations.                          Washington, DC
  Statements that managerial practices need improvements, as well as other
                conclusions and recommendations in this report
represent the opinions of the Office of Inspector General. Determinations of
 corrective action to be taken will be made by the appropriate Department of
                              Education officials.


In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports
   issued by the Office of Inspector General are available, if requested, to
 members of the press and general public to the extent information contained
               therein is not subject to exemptions in the Act.
                          UNITED STATES DEPARTMENT OF EDUCATION

                                                OFFICE OF INSPECTOR GENERAL

                                                                                                          THE INSPECTOR GENERAL




                                                  April 15, 2005

MEMORANDUM

TO:            Margaret Spellings
               Secretary of Education


FROM:          John P. Higgins, Jr. /s/


SUBJECT:       Final Report
               Review of Formation Issues Regarding the Department of Education’s
               Fiscal Year 2003 Contract With Ketchum, Inc. for Media Relations Services
               Control Number A19-F0007

Attached is the subject final report that covers the results of our review of formation issues
regarding the Department of Education’s Fiscal Year 2003 contract with Ketchum, Inc. for
Media Relations Services. We received your comments accepting our findings and
concurring with the recommendations in our draft report. As a result, no changes were
made to the report.

Corrective actions proposed (resolution phase) and implemented (closure phase) will be
monitored and tracked through the Department’s Audit Accountability and Resolution Tracking
System (AARTS). Department policy requires that you develop a final corrective action plan
(CAP) for our review in the automated system within 30 days of the issuance of this report. The
CAP should set forth the specific action items, and targeted completion dates, necessary to
implement final corrective actions on the findings and recommendations contained in this final
report.

In accordance with the Inspector General Act of 1978, as amended, the Office of Inspector
General is required to report to Congress twice a year on the reports that remain unresolved after
six months from the date of issuance.

In accordance with the Freedom of Information Act (5 U.S.C. §552), reports issued by the Office
of Inspector General are available to members of the press and general public to the extent
information contained therein is not subject to exemptions in the Act.

We appreciate the cooperation given us during this review. If you have any questions, please
call me at 202-245-6900.

Enclosure

                                            400 MARYLAND AVE., S.W. WASHINGTON, D.C. 20202-1510

                   Our mission is to ensure equal access to education and to promote educational excellence throughout the Nation.
                                    TABLE OF CONTENTS


                                                                                                       Page

EXECUTIVE SUMMARY .............................................................................. 1

BACKGROUND .............................................................................................. 2

INSPECTION RESULTS ................................................................................. 3

        Formation of the Ketchum Contract....................................................... 3

        Formation of the Graham Williams Group Work Requests................... 4

                 Formation of the First Graham Williams Group
                      Work Request..................................................................... 5

                 Formation of the Second Graham Williams Group
                      Work Request..................................................................... 7

                 OIG Analysis of Work Request Formation.................................. 9

        Oversight of Work Completed Under the Graham Williams Group
              Work Requests ............................................................................. 14

CONCLUSION................................................................................................. 18

RECOMMENDATIONS .................................................................................. 19
SCOPE AND METHODOLOGY……………………… ................................ 20

ATTACHMENT 1- Department of Education Response
                             EXECUTIVE SUMMARY

In December 2002, the Department of Education’s (Department) Office of Public Affairs (OPA)
finalized a Statement of Work (SOW) to obtain a contractor to assist with several facets of media
relations services. The contractor was expected to develop a comprehensive long-range
communications strategy for the Department to communicate information to the public on No
Child Left Behind (NCLB) legislation and implementation.
The SOW indicated that task orders or work requests would be issued for specific projects and
the period of performance would be one year with three option years. After completing a formal
competition process, the Department awarded the media relations services contract to Ketchum,
Inc. (Ketchum) on May 14, 2003.
During 2003, the Department contemplated work on an outreach campaign to disseminate NCLB
information to minority and economically disadvantaged parents. The Department initiated work
on this campaign because management believed details regarding NCLB programs were not
being conveyed to those who could most benefit from them.
The Department selected the Graham Williams Group (GWG) to perform work relating to the
minority outreach campaign. Services of the GWG were acquired through the Ketchum contract
by directing Ketchum to utilize the GWG as the subcontractor. Two separate work requests
involving the GWG were issued under the Ketchum contract. The first work request was
effective December 2, 2003, in the amount of $113,441.06. The second work request was
effective June 25, 2004, in the amount of $139,490.56.
The objective of this inspection was to determine whether the initial award to Ketchum and the
subsequent work requests involving the GWG were in compliance with the Federal Acquisition
Regulations (FAR) and other pertinent contract law. We also reviewed the effectiveness of the
oversight function with respect to the Ketchum contract and the GWG work requests.
Overall, we noted no violations of pertinent contract law and found no evidence of any ethical
violations in the formation of the Ketchum contract and GWG work requests. We did find that
Department officials made some poor management decisions, including the failure to provide
critical information to decision makers, and exercised poor judgment and oversight. As a result,
the Department paid for work that most likely did not reach its intended audience and paid for
deliverables that were never received. The advertisements (ads) that were produced under the
work requests appear to be of poor quality, and the Department has no assurance the ads received
the airtime for which it paid. The documentation we reviewed appears to indicate payment was
attributed solely to the production of ads and airtime. However, because other activities relating
to commentary were included in the SOWs and activity reports, and because the invoices
received and paid by the Department were vague, the appearance is that the
Department may have been paying for more than just the advertising.
The Department accepted our findings and concurred with our recommendations. The full text
of the Department’s response is included as Attachment 1 to this report. The Department’s
response does not warrant any changes to the draft report.

ED-OIG/A19-F0007                                                                   Page 1
                                    BACKGROUND

In late 2002, the Department of Education’s (Department) Office of Public Affairs (OPA)
planned to acquire media relations services by contracting with a public relations firm. OPA
management believed these services were needed because of staff and resource limitations within
the Department to perform these functions. The Department had previously contracted for these
types of services on a smaller scale.

The Department chose to contract for these services through the use of the General Services
Administration (GSA) schedule. The Department developed a Statement of Work (SOW) for the
proposed acquisition that was reviewed and finalized during December 2002. Prospective
contractors were expected to perform various tasks including: 1) developing a comprehensive
long-range communications strategy for the Department to communicate information on No
Child Left Behind (NCLB) legislation and implementation to the public; 2) developing short-
range strategies to disseminate information on specific topics related to NCLB, and 3) providing
technical and production support and consulting services to OPA.

The Department requested proposals in response to the SOW through correspondence dated
December 20, 2002. A total of six contractors were selected to participate in this process. The
Department received five responses by January 9, 2003, and created a Technical Review Panel to
evaluate and score these proposals in accordance with established rating criteria. The panel
completed this process on April 24, 2003, concluding that the proposal submitted by Ketchum
Inc. (Ketchum) offered the best overall proposal, would be extremely capable of meeting the
requirements outlined in the Statement of Work, and had specific experience working on NCLB
issues. As a result, the Department awarded an indefinite delivery indefinite quantity contract
with a base amount of $100,000 to Ketchum on May 14, 2003. The Ketchum contract was for an
initial one-year period with three renewal options.

Once awarded, the Department issued multiple task orders and work requests under the Ketchum
contract. This included two work requests for minority outreach programs relating to NCLB,
which required Ketchum to subcontract with the Graham Williams Group (GWG). The first
work request was effective December 2, 2003, in the amount of $113,441.06. The second work
request was effective June 25, 2004, in the amount of $139,490.56.




ED-OIG/A19-F0007                                                                 Page 2
                               INSPECTION RESULTS

The following presents the results of our review with respect to the contract formation issues for
the Fiscal Year (FY) 2003 Ketchum contract and related work requests with the GWG, and
provides additional information relating to contract oversight of the GWG work requests.

The Department accepted our findings and concurred with our recommendations. The full text
of the Department’s response is included as Attachment 1 to this report. The Department’s
response does not warrant any changes to the draft report.

Formation of the Ketchum Contract
We determined the processes followed by the Department in the formation of the Ketchum
contract were generally appropriate. From the review completed, we noted no violations of
pertinent contract law in the pre-award, evaluation, or award processes as they related to the
Ketchum contract. Specifically, we determined the Department:

     •   Considered other contracting options before choosing to utilize the GSA schedule;
     •   Was justified in using the GSA schedule as a contracting vehicle;
     •   Selected the proper Special Item Number (SIN) for contracting under the GSA schedule;
     •   Developed a SOW for the contracting effort that was generally in accordance with
         Federal Acquisition Regulation (FAR) requirements;
     •   Requested proposals from an adequate number of contractors in accordance with the
         FAR; and
     •   Reviewed and scored proposals in accordance with FAR requirements.

Additional details relating to the process followed in the formation of this contract are presented
below.

In early 2002, Office of the Secretary (OS) and OPA officials began discussing the possibility of
acquiring media relations services by contracting with a public relations firm. These services
were deemed necessary due to staff and resource limitations within the Department to perform
these functions, specifically with regard to the dissemination of information related to the NCLB
Act that had been recently signed into law. OS and OPA officials also indicated the Department
was receiving a lot of pressure from “the Hill” and the White House to effectively communicate
information on NCLB.

According to OPA and OS officials, the Department had contracted for these types of services on
a smaller scale prior to the FY 2003 Ketchum contract. The previous contract for these services
was with ZGS Communications, Inc (ZGS). OPA officials believed ZGS was not large enough
to effectively assist the Department in developing and implementing a strategy to communicate
information regarding NCLB.


ED-OIG/A19-F0007                                                                     Page 3
OS and OPA officials proceeded to contract for media relations services in late 2002 through the
use of the GSA schedule. According to OPA and OS officials, the decision to use the GSA
schedule was made in part due to the speed in contracting through this method. Documentation
in the contract files showed the Department had also considered other contracting options such as
full and open competition and existing Multiple Award Task Order Contracts. We found nothing
in applicable guidance to prohibit the use of the GSA schedule for this procurement. The
Department selected SIN 738-8 “Full Service Marketing Media, and Public Information
Services” for this procurement. We reviewed available descriptions of services provided under
this SIN and determined the Department selected the proper SIN for this acquisition.

The Department developed a SOW for the proposed acquisition. Documentation in the contract
files indicated the SOW was reviewed and finalized in December 2002. We reviewed the SOW
and determined it generally complied with the related requirements of FAR Subpart 8.4.

The Department subsequently requested proposals in response to the SOW from six selected
contractors, including the incumbent, through correspondence dated December 20, 2002. The
process followed by the Department exceeded the applicable FAR requirements to seek offers
from at least three schedule contractors that offer services that will meet the agency's needs.

The Department received five responses by January 9, 2003, and created a Technical Review
Panel to evaluate and score these proposals in accordance with established rating criteria. The
panel consisted of three individuals—two from the Office of Intergovernmental and Interagency
Affairs that were noted as having previous experience with public relations contracts, and a
management analyst from OS. The panel completed the evaluation process on April 24, 2003,
concluding that Ketchum offered the best overall proposal, would be extremely capable of
meeting the requirements outlined in the Statement of Work, and had specific experience
working on NCLB issues. We found no evidence to indicate that members of the Technical
Review Panel were biased or were pressured to select Ketchum as the contractor for these
services. We also found no indication that the SOW and/or evaluation criteria were developed in
a way that would favor Ketchum over any of the other contractors invited to submit proposals.

The panel’s report to the Contracting Specialist recommended award to Ketchum. As a result,
the Department awarded an indefinite delivery indefinite quantity contract with a base amount of
$100,000, funded with OS administrative funds, to Ketchum on May 14, 2003. The contract
includes three option periods that could extend the contract through May 13, 2007.

Formation of the GWG Work Requests
We found that the process followed in the development and issuance of the GWG work requests
did not explicitly violate provisions of pertinent contract law. We did note noncompliance with
subcontracting terms associated with the Department’s contract with Ketchum. We also noted
other concerns with the formation process for these work requests. Formation activities did not
always conform to contracting best practices, and activities did not ensure that potential
weaknesses were identified and corrected. Overall, the formation process contributed to
problems later experienced in the execution of the GWG work requests.


ED-OIG/A19-F0007                                                                   Page 4
Specifically, we identified the following noncompliance and concerns with respect to the
formation of these work requests:

    •   The SOWs issued by the Department were not consistent with performance based
        contracting preferences identified in FAR Subpart 37-6;
    •   Documentation was not provided as required in the overall Ketchum contract Statement
        of Work, Section V.D., Contractor Personnel- Subcontractors;
    •   The Department’s direction to use a particular subcontractor gave the appearance of
        circumventing competition in contracting;
    •   The Department lost the opportunity to obtain Ketchum’s “expert advice” on how to best
        conduct a minority outreach campaign by directing Ketchum to utilize the GWG;
    •   The Department did not obtain assurance that the GWG offered the best value to the
        government with respect to conducting a minority outreach campaign;
    •   The Department and Ketchum did not recognize that information submitted by the GWG
        indicated the demographic makeup of its audience was not consistent with that targeted
        by the Department;
    •   Activities relating to favorable NCLB commentary were included in the SOWs,
        providing the appearance the Department was buying more than just advertising;
    •   Department officials involved in the decision to proceed with the issuance of the second
        work request did not receive information that could have assisted them in making a fully
        informed decision.

We noted no ethical violations in the formation of the work requests. We did identify other
factors that may have contributed to the Department’s rationale for entering into the arrangement
with the GWG. Additional details relating to the process followed in the formation of the GWG
work requests are presented below, followed by a detailed analysis of issues noted.

Formation of the First GWG Work Request

In an effort to generate additional business for the GWG, Armstrong Williams, President and
Chief Executive Officer of the GWG, submitted a business proposal to the former Secretary of
Education, during a meeting both were attending at the Department in March 2003. Mr.
Williams indicated the GWG was attempting to use available opportunities to gain business, and
had issued proposals to other Government agencies as well. According to the former Secretary,
the proposal was subsequently passed along to his Chief of Staff (A)1. The former Secretary and
former Chief of Staff (A) both noted that the Secretary received many proposals from people
looking to pursue business opportunities with the Department. They both indicated the standard
practice was for the Secretary to provide the Chief of Staff with the proposal so that the proposal
could be vetted with appropriate Department officials to determine whether it had any merit.

The former Chief of Staff (A) convened a meeting with the former Director of OPA in late
March 2003, and subsequently passed the proposal along to him for further consideration.
Apparently no immediate action was taken with regard to the proposal. As a result of follow-up

1
  Two different Chiefs of Staff served the former Secretary during the formation of the Ketchum and GWG work
requests. To differentiate between the two, we have labeled them as A and B. Chief of Staff (A) left the
Department in October 2003.
ED-OIG/A19-F0007                                                                               Page 5
calls from Mr. Williams, the former Secretary indicated he again requested his Chief of Staff (A)
and Director of OPA to look into the merits of the proposal and make a determination about it
one way or the other.

The former Director and Deputy Director of OPA met with Mr. Williams at the Department in
the Fall of 2003 to further discuss the services the GWG could provide with regard to NCLB
outreach. OPA management was considering the development of a minority outreach campaign,
with the purpose being the dissemination of NCLB information to minority and disadvantaged
communities. Management officials considered an outreach campaign necessary because they
believed these communities could benefit most from NCLB and needed to know more about the
programs and services available.

While the Deputy Director indicated she did not believe it was a good idea to pursue the
relationship with the GWG any further, the former Director felt otherwise. The OS Executive
Officer stated OPA or OS management subsequently approached her regarding contracting
directly with the GWG for the minority outreach campaign. The OS Executive Officer stated she
informed management that to accomplish this, either a competitive contracting process or
justification for sole source contracting would be required. She stated that she mentioned
pursuing the use of the GWG as a subcontractor under the existing Ketchum contract.

In November 2003, the former Director of OPA contacted Ketchum officials and asked for a
meeting to discuss a minority outreach effort. Ketchum officials indicated the meeting was
basically to let Ketchum know that the Department wanted to use the GWG for a minority
outreach program under the existing Ketchum contract, and they were to contact Mr. Williams
immediately to proceed. Ketchum officials also indicated the former Director of OPA told them
how much money could be spent on the task. Ketchum officials indicated this was different
from how the task order/work request process worked previously under this contract, indicating
that usually ideas would be discussed and Ketchum would subsequently submit a proposal that
would include cost estimates. Ketchum officials stated that on other work under the contract
they had selected the subcontractor after conducting research on different options to ensure the
best price and product was obtained. Ketchum officials also indicated that most of their
communication with the Department up until this point had been with the Deputy Director of
OPA as opposed to the Director.

Ketchum officials indicated a meeting took place between them and Mr. Williams a few days
later, and it appeared Mr. Williams was already aware of the effort and had already created a
television advertisement. Mr. Williams indicated to OIG that the cost associated with the level
of services he provided was well below what he would normally charge. Because he believed in
NCLB and wanted the business, Mr. Williams agreed to perform for the cost the Department was
willing to pay. Mr. Williams subsequently provided a written proposal to Ketchum detailing the
GWG’s services and the costs agreed upon.

Ketchum officials stated they used the GWG proposal noted above with limited modifications to
prepare their own proposal to the Department. Ketchum’s proposal was provided to the
Department via correspondence dated November 17, 2003, addressed to the former Director and
the Deputy Director of OPA. This proposal “recommended” the use of the GWG subsidiary,

ED-OIG/A19-F0007                                                                   Page 6
Right Side Productions, for television and radio advertising and specified work that would be
completed under this project. The proposed deliverables included:

   •   Creation and placement of two television and two radio ads;
   •   Providing Department officials with the option to appear as studio guests to discuss
       NCLB and other important education reform issues;
   •   Mr. Williams using his long term working relationship with America’s Black Forum to
       encourage the producers to periodically address NCLB.

The body of the Ketchum proposal also indicated that Mr. Williams would regularly comment on
NCLB during the course of his broadcasts and would work with African-American newspapers
to place stories and commentary on NCLB. The resulting SOW, which was prepared by the
Contracting Officer’s Representative (COR) within OPA, mirrored the Ketchum proposal and
included each of the deliverables identified above. The body of the SOW also stated that
Ketchum should arrange for Mr. Williams to regularly comment on NCLB during the course of
his broadcasts.

A contract modification was signed by Department contracting officials on January 6, 2004, with
an effective date of December 2, 2003. This increased the Ketchum contract by $113,441.06, to
complete the minority outreach campaign.

Formation of the Second GWG Work Request

OPA and OS officials indicated that as the first work request expired in May 2004, the
Department was contemplating whether to continue the minority outreach program by awarding
a second work request through Ketchum to the GWG. An undated SOW to continue the
campaign was prepared. This SOW was virtually identical to that issued for the first campaign.

In response to the SOW, Ketchum submitted a proposal to the Department dated May 18, 2004,
addressed to the Contracting Officer (CO), the Deputy Director of OPA and the COR. In
addition to the work requested in the SOW, the Ketchum proposal recommended the campaign
include developing commentary for several African American newspapers.

While the former Director of OPA was indicating he believed the campaign was successful due
to the increased number of visits to the NCLB website, both the Deputy Director of OPA and the
former Chief of Staff (B) indicated they raised concerns with continuing the campaign. Their
concerns included the cost of the program, the inability to measure the effectiveness of the
program, and the inherent conflict of Mr. Williams' role as both a public relations executive and
commentator. These concerns were raised to the former Secretary and former General Counsel
prior to the issuance of the second work request. The concerns were so strong that both the
Deputy Director of OPA and the former Chief of Staff (B) stated that, prior to the issuance of the
second work request, they each called the Special Assistant to the President for Domestic Policy




ED-OIG/A19-F0007                                                                   Page 7
responsible for education issues at the White House, who indicated he agreed with their
concerns. 2

According to the former Chief of Staff (B), after she expressed her concerns to the former
Secretary, he asked her whether it was illegal, and indicated his main concern was with reaching
the minority community. She subsequently asked the Department’s former General Counsel to
review the second work request to determine whether there were any legal reasons to not go
forward with it, and expressed her desire to find a way to stop it. [OGC did not review the first
minority outreach campaign work request, as it was not Department policy to have a legal review
of such documents before they were issued.] The former General Counsel stated he asked his
Deputy General Counsel for Departmental and Legislative Service to review and comment on
the work request documents provided by the former Chief of Staff (B). [We have determined this
was the May 18, 2004 proposal from Ketchum.]

On June 2, 2004, the Deputy General Counsel provided an analysis in an e-mail sent to the
former General Counsel and his Chief of Staff. The analysis concluded the best course of action
and main option available at that point in time was to withdraw the SOW. The communication
stated there was nothing clearly erroneous with the proposal, however a weak argument could be
made that the proposal may possibly run afoul of Federal statutes prohibiting use of appropriated
funds for publicity or propaganda purposes. The analysis also mentioned the concern over
whether the purchase of access to media and news programs was appropriate, even with full
attribution to the Department, noting it was not squarely addressed in the statutory prohibitions
cited.

The communication indicated once additional documentation was obtained, specifically the
overall Ketchum contract and the SOW, it would be reviewed and any updated analysis would be
provided. [We were not provided with any updated analysis relating to the second work request.
As noted above, the SOW was virtually identical to the Ketchum proposal that was reviewed.]

The former General Counsel informed us that he subsequently told the former Chief of Staff (B)
that the Department had the option to withdraw the work request if services were no longer
deemed necessary, but there was no legal reason not to proceed. In a subsequent meeting
between the former General Counsel and former Secretary, the former General Counsel stated he
was asked simply to answer a very narrow question—whether the work request was legally
defensible or not— to which he stated it was. He did not share the written analysis from his
Deputy or convey any of the concerns noted in it with the former Secretary or with the former
Chief of Staff (B). The former General Counsel indicated his impression was the former
Secretary would not have been interested in the information. The former Secretary confirmed
that he had a brief discussion with the former General Counsel and had asked about whether the
process was legal. He stated that his only point of interest was in getting the correct word out
about NCLB, and since the former Director of OPA assured him the Department was receiving


2
  During a meeting between White House and Department officials on July 13, 2004, pertaining to communications
strategy, the Special Assistant to the President for Domestic Policy briefly questioned the Deputy Director of OPA
about the status of the Williams’ work request. The Deputy Director stated she was unsure of the status. No further
discussion ensued on the subject until a few days after the meeting, when the former Chief of Staff (B) contacted the
Special Assistant to inform him the work request had already been signed and issued on June 25, 2004.
ED-OIG/A19-F0007                                                                                   Page 8
value from the work, and OGC assured him it cleared “legal muster”, he subsequently supported
the renewal.

On June 25, 2004, the second work request, funded with OS administrative funds in the amount
of $139,490.56, was signed and placed into effect.

OIG Analysis of Work Request Formation

As stated previously, while we did not note explicit violations of pertinent contract law, we did
note noncompliance with contract terms, as well as concerns with formation activities that did
not always conform to contracting best practices, and activities that did not ensure that potential
weaknesses were identified and corrected. We also identified factors that may have contributed
to the Department’s rationale for entering into the arrangement with the GWG. A detailed
analysis of the issues noted follows below.

Performance-Based Contracting

Overall, we noted the SOW issued by the Department defined specific tasks to be performed by
the contractor, and did not provide for any mechanism by which to measure the performance and
effectiveness of the campaign. The SOW included the length of ads, number of ads to be run,
and times and stations on which the ads were to be run. This was not consistent with
performance based contracting preferences identified in the FAR.

FAR Subpart 37.102, “Policy” states that:

       Performance-based contracting is the preferred method for acquiring services. When
       acquiring services, including those acquired under supply contracts, agencies must-
       [u]se performance-based contracting methods to the maximum extent practicable…

FAR Subpart 37.602-1 states that:

       (b) When preparing statements of work, agencies shall, to the maximum extent
       practicable –
              (1) Describe the work in terms of “what” is to be the required output rather than
              either “how” the work is to be accomplished or the number of hours to be
              provided (see 11.002(a)(2) and 11.101);
              (2) Enable assessment of work performance against measurable performance
              standards…

Compliance with Contract Terms

We noted the terms of the overall Ketchum contract were not met with regard to the use of
subcontractors. Per section V.D. of the SOW, the contractor was permitted to subcontract parts
of the work of the overall contract as long as evidence was presented that the subcontractor had
agreed in writing to perform and that the contractor had effective control of the subcontractor. A
separate statement by the subcontractor to this effect was also to be included with Ketchum’s

ED-OIG/A19-F0007                                                                     Page 9
proposal for the related work, prior to the actual issuance of the subcontract. Neither the
Department, Ketchum or the GWG could provide any documentation to support compliance with
this requirement, and none of the parties noted appeared to even be familiar with this
requirement.

Selection of Subcontractor

•   Although not explicitly prohibited, the Department used the Ketchum contract as a vehicle to
    acquire the services of the GWG without completing a competitive process or sole source
    justification. The Department’s contract with Ketchum did not include the relevant clause
    from the FAR requiring competition in subcontracting, however the Department’s direction
    to use a specific subcontractor still gives the appearance of circumventing competition. The
    Department’s Contracts and Acquisition Management (CAM) staff stated that they would
    normally question the specification of a subcontractor in a task order/work request, however
    they did not in this instance as they considered this to be a special circumstance because it
    involved OS.

•   We noted one purpose of the overall Ketchum contract was to obtain “… expert advice on
    the development of multimedia communications plans that shall ensure [Department]
    materials and messages reach their intended audiences.” By directing Ketchum to utilize a
    particular subcontractor, the Department lost the opportunity to obtain “expert advice” on
    how to best conduct this campaign.

•   Ketchum officials stated they proceeded with the subcontracting arrangement in November
    2003, under the assumption that the Department had gone through a proper process in
    making the selection and had considered different subcontractors to get the best price and
    product. However, the Department had not conducted work to gain assurance that the GWG
    offered the best value to the government prior to directing Ketchum to use the GWG for the
    minority outreach campaign. As a result, neither the Department nor Ketchum effectively
    screened the performance capabilities or cost effectiveness of using the GWG.

    Office of Federal Procurement Policy (OFPP) Policy Letter 93-1, Management Oversight of
    Service Contracting, Section 6, Policy, states in part:
       When contracting for services, it is the policy of the Federal Government that…

       c. Services are to be obtained in the most cost effective manner, without barriers to full
       and open competition, and free of any potential conflicts of interest.
       e. Effective management practices are used to implement the guiding principles
       contained herein to prevent waste, fraud, and abuse in services contracting
    Section 7 – “Good Management Practices” states in part:
       [S]ervices that tend to affect Government decision-making, support or influence policy
       development, or affect program management are more susceptible to abuse. These,
       therefore, require a greater level of scrutiny...

ED-OIG/A19-F0007                                                                  Page 10
        b. Cost Effectiveness. When a valid requirement exists, agency officials must ensure
       that the requirement is obtained in the most cost effective manner. If contractor support
       is deemed appropriate, agencies should ensure that their acquisition strategy will result
       in the acquisition of services from a quality vendor that constitute the best value
       considering costs and other relevant factors, and yield the greatest benefit to the
       Government.
•   In the absence of an effective screening process, neither the Department nor Ketchum
    identified indicators that the demographic makeup of the GWG audience was not consistent
    with the audience targeted by the Department. The television ad produced and aired under
    this program indicates it seeks to convey information to economically disadvantaged parents.
    The ad states in part:

       Parents in economically disadvantaged school districts can get information about how
       well their school is performing, about their teachers’ qualifications, and about whether
       their school is safe.

    We found the proposal prepared by the GWG that was submitted to Ketchum includes the
    following information:

       Studies by Paul Kagan Associates, based on our affiliate shares and programming,
       reveal that Right Side Production’s primary audience consists of sophisticated and
       affluent people who surround themselves with the finer things in life. Quality
       automotives, packaged goods, luxury travel and fine clothing and accessories are among
       the products that are advertised in this sophisticated program. Right Side Production’s
       audience represents a market of uncompromising taste and spending power…

       Consumer Profile(s) of viewers from Right Side Production.

       Financial:
       40% more likely to have a full service brokerage account
       91% more likely to have securities valued over $100,000
       70% more likely to use an American Express Card

       Automotive:
       51% more like to purchase a new car with a sticker price over $40,000…

       Computers:
       98% more likely to do their banking online
       97% more likely to find financial information or do stock trading online.

SOW Requirements

Although Department officials have stated they were under the assumption they were only
buying advertisements and airtime, we noted there were numerous indicators during the
formation process that the GWG work under the work requests could include providing or
attempting to arrange favorable NCLB commentary through various media outlets, which could

ED-OIG/A19-F0007                                                                   Page 11
have been removed prior to the issuance of the work requests. This included language contained
in the GWG proposal, the Ketchum proposal, and the SOW issued by the Department.

The undated GWG proposal stated in part:

   Having contacts with people who influence local and national opinion will pay off by getting
   you at least balanced coverage of what could be a nasty defensive PR situation…

   GWG can help win the battle for media space by drawing upon our long-standing
   relationships with, The Russ Par radio show, Stevie Wonder’s KJLH (CA), and Sinclair
   broadcasting (which owns 63 network affiliates) and America’s Black Forum (which has
   been carried by network affiliates for over 25 years), to promote the [NCLB]. We will utilize
   that platform to further educate the public on the benefits of this important reform. These
   favorable commentaries will amount to passive endorsements from the media outlets that
   carry them – media outlets that speak most directly and potentially to the African American
   and broader community…

Department and Ketchum representatives indicated to us that they were not aware of this at the
time the work requests were in effect. Mr. Williams stated he had always been uncomfortable
with the non-advertisement related items in the contract and had spoken to Ketchum
representatives and the former Director of OPA about it before the contract was finalized.
Department and Ketchum representatives did not recall any such conversations taking place.
While we noted the costs associated with the proposal are only attributed to the production and
airing of the television and radio advertisements, the additional language in the proposals and
resulting SOW presents the appearance that other services were being paid for.

Information Provided to Decision Makers

Our review noted that a lack of information provided to Department officials may have resulted
in the issuance of the second work request that otherwise may not have occurred had they been
fully informed. Even if the concerns had been shared after the issuance, the Department still
would have had an option to cancel the resulting work request if deemed necessary. The former
General Counsel told us in retrospect that he wished he had shared the concerns noted in OGC’s
June 2, 2004 analysis with the former Secretary. He indicated that he felt the former Secretary
valued his opinion, trusted him, and he was someone the former Secretary would normally vet
things through. The Deputy General Counsel has also noted to us that he believed anyone
making a decision on the issuance of this work request should have had the information available
to them.

During the course of our review, we showed the former Secretary and former Chief of Staff (B)
OGC’s June 2, 2004 written legal analysis of the work request. Both became upset and indicated
they had never seen nor heard of the concerns before, and that had they been informed of the
contents of the communication it would have impacted the decision to move forward with the
work request. The former Secretary stated there had been several occasions after concerns about
the work requests arose in the media and prior to his departure in January 2005 where he had
inquired about whether there were any issues with the GWG work requests. These meetings

ED-OIG/A19-F0007                                                                 Page 12
were attended by the former General Counsel and Deputy General Counsel. Neither ever spoke
of the concerns that had previously been noted in the analysis.

Ethical Considerations

We found no evidence that the Department entered into a contractual relationship with the GWG
as the result of any personal relationships that had previously been developed with its CEO and
President, Armstrong Williams. According to the former Secretary, they first met at an event in
Washington DC in 2001, during the former Secretary’s first year as Secretary of Education.
Prior to the awarding of the first GWG work request, the former Secretary and Mr. Williams did
meet on a few occasions at the Department, which appears to have been standard practice with
regard to media personalities. The former Secretary characterized Mr. Williams as an
acquaintance who had an aggressive personality. Mr. Williams characterized his relationship
with the Secretary as cordial, friendly and respectful. He referred to himself as an “opportunist”
that liked to have access to Cabinet members. He did not recall the Secretary ever initiating any
contact with him, other than an invitation that came from the Secretary’s office in January 2004
to attend a Kennedy Center concert, also attended by several other high-profile individuals. Mr.
Williams and the former Secretary both mentioned their attendance at a professional football
game back in December 2003. The former Secretary paid for his own seat to this game, and the
invitation was actually extended to several minority Government officials by the son of the
team’s owner. The former Secretary stated he attended the game only in an effort to try to forge
relationships with the National Football League regarding NCLB.

Several Department officials indicated they had never heard of or met Mr. Williams until just
prior to or after the awarding of the work requests. Some stated they were aware of his name but
had never met him. While two other Department officials did appear to have some previous
contact with Mr. Williams, nothing came to our attention that would suggest any close
relationships existed that would call into question the ethics of the resulting work requests.

Other Contributing Factors

•   We noted several of the Department officials we interviewed and some documentation we
    reviewed indicated one of the reasons the Department may have entered into the arrangement
    with the GWG was to assist efforts in getting the former Secretary on a particular television
    talk show. Because one of the founding partners of the GWG had a close personal
    relationship with the talk show host, some Department officials felt this may give the
    Department access to the television program, as other attempts apparently had failed.

•   The Department may also have entered into the arrangement simply because they had been
    looking for an opportunity to do more minority outreach, Mr. Williams came along and
    submitted a proposal for work with the Department, and the Department took advantage of
    an opportunity that presented itself that appeared to meet its needs, without determining
    whether it really was the best way to proceed.




ED-OIG/A19-F0007                                                                  Page 13
Oversight of Work Completed Under the GWG Work Requests
The monitoring of work completed under the minority outreach campaign work requests did not
ensure that performance was adequate or that the results desired by the Department were
achieved. We found that monitoring activities generally did not did not conform to applicable
FAR and OFPP guidance. As a result, the monitoring process did not protect the interests of the
Department or identify problems with the execution of the work requests in a timely manner, and
the Department paid for deliverables it never received.

FAR Subpart 1.602-2 states:

       Contracting officers are responsible for ensuring performance of all necessary actions
       for effective contracting, ensuring compliance with the terms of the contract, and
       safeguarding the interests of the United States in its contractual relationships.

Office of Federal Procurement Policy (OFPP) Policy Letter 93-1, Management Oversight of
Service Contracting, Section 7 – “Good Management Practices” states:

       c. Control. When contracting for services, in particular for highly specialized or
       technical services, agencies should ensure that a sufficient number of trained and
       experienced officials are available within the agency to manage and oversee the contract
       administration function. This especially applies to such services as management and
       professional support, studies, analyses, and evaluations, and engineering and technical
       support. Agency officials need to be able to make sound judgements on what the
       requirements should be, the estimated costs, and whether the contractor is performing
       according to the contract terms and conditions… Agency officials must also provide an
       enhanced degree of management controls and oversight when contracting for functions
       that closely support the performance of inherently Governmental functions.

We found the Department could not always ensure compliance with contract terms due to
weaknesses in the monitoring process. We identified several areas that showed inadequacies
with respect to this process, specifically:

   •   Key Department officials were not familiar with SOW requirements. Staff that are
       unfamiliar with the provisions of the contract cannot be expected to effectively ensure
       contract terms are met.

   •   Department officials other than the Contracting Officer and COR had direct contact with
       the contractor and subcontractor regarding contract performance and agreements. This
       raised the potential for misunderstandings regarding contract terms and execution
       between all involved parties. We noted during our review that the subcontractor believed
       certain performance aspects had been resolved verbally, while the contractor and the
       Department officials had no recollection of discussing these matters or reaching
       agreements.



ED-OIG/A19-F0007                                                                  Page 14
  •   There was no methodology in place to validate that the GWG aired ads as reported in
      activity reports. Neither the Department nor Ketchum had a process to spot check that
      any of the ads were run as claimed by the GWG. Representatives from both noted they
      were not spot checking the ads. Ketchum officials indicated they had asked the
      Department whether it wanted to pay for an independent third party to verify the airtime,
      which they indicated was standard practice and which the Department had apparently
      used on other projects, and they were told the Department did not have the funding to do
      so.

  •   There was no methodology to measure the effectiveness of the work performed by the
      GWG. There was no measurement system to determine if the ads were effective in
      meeting the goals and target audience of the minority outreach campaign. While the
      former Director of OPA indicated the NCLB website hits had increased during this time
      period, there was no way to measure whether it was the result of this or other outreach
      efforts. Although the impact of the first work request was not measured, the Department
      continued the campaign through the issuance of the second work request.

  •   The Department did not question, and in one instance assisted with, work completed
      outside of the period of performance. This included the production of radio and
      television ads featuring the former Secretary in advance of any contractual agreement
      with Ketchum, and the airing of ads in the periods before, between, and after effective
      agreements with Ketchum.

  •   The Department paid invoices provided by Ketchum although they did not clearly
      identify what the Department was receiving in return for payment (i.e. performance
      period, number of ads, production costs, or other elements). These invoices included
      single line items that identified the GWG subsidiary, Right Side Productions, as the
      payee, along with the date and amount.

  •   Neither the Department nor Ketchum was aware that Mr. Williams stopped airing his
      radio show in May 2004. Radio ads were included as a deliverable in the second work
      request issued in June 2004. Radio ads were never listed on activity reports for the
      second work request. Mr. Williams stated he notified Ketchum and the Department
      about this, but no officials of Ketchum or the Department recalled these conversations.

  •   The Department did not identify the 168 activities other than ads cited by Mr. Williams
      on his activity reports as promoting NCLB (including appearances on television
      programs other than his own, speeches, and published works) as a potential concern.
      Ketchum officials indicated these activity reports were passed along to the Department.
      Department officials, including the COR, have stated they do not recall seeing any of
      these reports until December 2004. Documentation obtained by OIG shows the
      Department did receive at least one of these reports prior to that. The report was sent by
      Ketchum to the COR in April 2004 in response to a Department request for information
      to assist with the determination of whether to move forward with a second work request.
      Another report noting Mr. Williams’ appearances was sent to both the COR and Deputy
      Director of OPA in July 2004.

ED-OIG/A19-F0007                                                                 Page 15
   •   The television ad produced under the first work request appears to consist of a public
       service announcement taped by the former Secretary for Mr. Williams in October 2003
       by the Department. The Department appears to have subsequently paid for something it
       had already substantially produced itself.

   •   The radio advertisement that was produced appears to be the audio track from the
       television ad. Even though it was a required deliverable, the Department never received a
       recording of the radio ad until sometime in early 2005, at its own request.

   •   Ads identified as a deliverable for the second work request were never completed.
       Although the GWG was paid to produce new ads, the television ad from the first work
       request was repeated under the second work request.

   •   Full ad production costs were billed and paid by the Department, even though the
       Department only received two of the eight ads it was supposed to receive under both
       work requests.

   •   Mr. Williams has recently stated he never performed the activities related to the
       deliverable pertaining to America’s Black Forum. He had never received approval to not
       perform this activity and no one at the Department seemed aware until recently that he
       had not performed this activity.

   •   There was no documentation to indicate activity reports were reviewed and evaluated to
       compare required versus actual performance.

According to the COR, the former Director of OPA was the contact person for the GWG work
requests and involved in the day to day oversight of activities. As a result, the COR indicated
she did not always have tangible proof to authorize payment, but relied on assurances from the
former Director of OPA that everything was “going great”. She added that she and the
Contracting Specialist were often kept “out of the loop” regarding communications between
Ketchum, the GWG and the Department. We noted an e-mail sent in October 2004 by the
Contracting Specialist to Ketchum representatives regarding these communications concerns.

Contract monitoring weaknesses increase the risk of irregularities and inefficiencies in contract
performance. Inadequate documentation of contract monitoring and review and acceptance of
deliverables impairs the Department’s ability to hold the contractor accountable for performance.
Failure to enforce contract terms may also constitute a waiver of the Department’s rights to
enforce contract terms, may support interpretations of contract requirements contrary to the
Government’s best interest, and/or may subsequently weaken the Government’s position to
effectively defend itself in contract disputes.

In a letter issued to Ketchum by the Department’s Contracting Officer on March 4, 2005, the
Department requested additional information about how many deliverables were actually
produced under the work requests, which work request the deliverables that had been received
were produced under, whether the required ads had actually been produced, and whether
Ketchum was aware of any oral or written modifications to the work requests that would have

ED-OIG/A19-F0007                                                                  Page 16
excused it from producing the required deliverables—information the Department should already
have known had it been effectively monitoring work performed under the work requests.

The Department has paid $188,500 to date under the two work requests with the GWG, a portion
of which was for ads that were never produced, as well as ads that were of poor quality, airtime
for which it has no assurance was actually utilized, and a target audience that was most likely
never reached.




ED-OIG/A19-F0007                                                                Page 17
                                      CONCLUSION

While the Department did not explicitly violate any significant laws or regulations relevant to the
formation of the Ketchum contract or GWG work requests, they did make a series of bad
management decisions, including the failure to share critical information with decision makers,
and exercised poor judgment and oversight. As a result, the Department paid for work that most
likely did not reach its intended audience and paid for deliverables that were never received. The
ads that were received appear to be of poor quality, and the Department has no assurance the ads
received the airtime for which it paid. The documentation we reviewed appears to indicate
payment was attributed solely to the production of ads and airtime. However, because other
activities relating to commentary were included in the SOWs and activity reports, and because
the invoices received and paid by the Department were vague, the appearance is that the
Department may have been paying for more than just the advertising.




ED-OIG/A19-F0007                                                                   Page 18
                              RECOMMENDATIONS

We recommend that the Secretary of Education take action to ensure:

   1. CAM and Program Office staffs are familiar with the terms and conditions of the
      contracts they are responsible for managing and that contract terms are enforced.

   2. CORs track and keep COs fully informed of the status of all deliverables.

   3. COR recommendations for invoice payment are supported by adequate documentation of
      acceptable performance.

   4. CORs are provided sufficient resources to fulfill their responsibility for overall contract
      monitoring, and that other involved staff provide the COR with appropriate input as
      needed. Specifically, for each contract, a contract monitoring plan should be developed
      by which:

          a. the COR ensures deliverables are tracked, inspected in accordance with contract
             requirements, and formally accepted or rejected;
          b. the CO and COR are involved in all key discussions with the contractor regarding
             contract performance, proposed changes to the scope of work, and provide
             appropriate authorization for any such changes,

   5. The CO, COR, and other Program Office staff involved in contract management, meet to
      review the contract monitoring plan, and agree upon the methodology for monitoring the
      applicable contract. During the meeting, the CO should review the requirements in the
      FAR, the Department’s Directive for contract monitoring, and the terms of the contract,
      including deliverable requirements, to ensure that all parties understand their
      responsibilities for contract monitoring.

   6. Appropriate FAR citations and clauses are incorporated into Department contracts, to
      include clauses requiring competition in subcontracting, to ensure the best value and best
      approach are achieved.

   7. Performance-based contracting is utilized to the extent possible, to ensure mechanisms
      are in place to effectively measure contract performance.

   8. Funds are recovered under the GWG work requests, if appropriate, for deliverables that
      were paid for but never received.




ED-OIG/A19-F0007                                                                   Page 19
                          SCOPE & METHODOLOGY

This inspection was performed in accordance with the President’s Council on Integrity and
Efficiency (PCIE) Quality Standards for Inspections (2005). The inspection was conducted
during the period January 18, 2005 through April 4, 2005.

To complete our work we conducted interviews with current and former employees of the
Department, Ketchum, and the GWG. We reviewed related documentation maintained by the
Department’s CAM, OPA, OS and OGC relating to the Ketchum and GWG awards. This
included contract documents, proposals, SOWs, invoices, and activity reports. We also reviewed
available e-mails and correspondence regarding the Ketchum and GWG awards.

We reviewed applicable sections of the FAR; OFPP Policy Letter 93-1, Management Oversight
of Service Contracting; the Competition in Contracting Act of 1984; and related Department
policies and procedures.




ED-OIG/A19-F0007                                                               Page 20
Attachment 1