The Navy- Integrated .- Command/Management Information System (NAICOM /M IS) B-l63O74 .-. _- :.. i . _ ’ _ . . _ ., J . - %- ” ’ : 9, ; ,L- . . ’ ; ‘. . . ,. .. . i . .’ ‘... :‘ -:.- ( -SEPT. I ti:1 97 3. ;:' ‘. ,.__ , _ WASHINGTON. B-164031 (3) ,,-r Dear Mr. Seiberling: Your letter of June 22, 1971, requested that we look intoLonL-r-a?ts ,-I -L. I 'F c awarded by the Social and Rehabilitation Service of the Department of -, _,- Health, Education; and Welfare (HEW) On a noncompetitive basis, A news- " * d paper article forwarded to you by-a-constituent referred to an HEW study of this matter. This study on the Service's contracting practices was made by the Office of General Services, a unit withinihe Office of the Assis- tant Secretary for Administration and Management, HEW. The newspaper article stated that, during a period of just over a year, contracts amounting to more than $18 million had been awarded to private firms by the Service and that almost one half of the Service's procurements had been made on a noncompetitive basis. Service officials advised us, how- ever, that only a small portion of the contracts had been awarded to private firms on a noncompetitive basis. They stated that almost all the noncompeti- tive contracts had been awarded to State and local governments or voluntary nonprofit or educational institutions under circumstances where competition had been impracticable. The contention that competition for such contracts had been impracticable appears reasonable on the basis of the following in- formation furnished to us by Service officials. Of the contracts in the amount of about $15.8 million awarded in fiscal year 1970--for which formal requests for proposals were required, that is, those exceeding $2,500--$3.6 million represented contracts awarded on a com- petitive basis; $8.2 million represented contracts with State and local gov- ernments, of which almost all was spent for demonstrations of concepts related to the proposed family assistance program; and $3.6 million represented renewal contracts, of which most were with voluntary nonprofit organizations that had been supplying resettlement services to Cuban refugees. Of the contracts awarded in the amount of $12.2 million on a noncompeti- tive basis, about $370,000 represented contracts awarded to profitmaking orgal nizations. Service officials informed us that these awards had been made because of special circumstances such as the availability of only one contractor to accomplish the work in the required time frame and the impossibility of adequately defining or specifying in an invitation to bid the detailed required services. DEFICIENCIES IN PROCUREMENTPRACTICES The HEW report, dated January 27, 1971, pointed out certain deficiencies in the Service's procurement practices and included various recommendations to correct the deficiencies. Following are the major findings contained in the report and, according to officials of the Service, the related actions taken on the findings. 50 TH ANNIVERSARY 1921-3971 . . . B-164031(3) Procurement nlanning: Findings There was no timely, organized, systematic, or coordinated method of planning for procurement between the Service's program offices and the con- tract branch. Although some progress had been made in 1970, almost one half of the Service's procurements still were being made on a noncompetitive basis and many of the sole-source justifications were inadequate. Action taken The Service established a committee chaired by the Associate Administra- tor for Management to plan and coordinate program procurement needs. The Service believed that this planning device would ensure sufficient lead time for the contract branch to adequately prepare contract specifications, to solicit and evaluate proposals, and to negotiate contracts and would thereby avoid the conditions and circumstances that could result in unjustifiable sole- source procurements. Competitive practices Findings The Service violated Federal Procurement Regulations by failure to (1) publish proposed procurements in the Commerce Business Daily in 60 percent of the required cases and (2) issue formal requests for proposals on noncom- petitive procurements. Although the Service had solicited and received pro- posals from multiple sources on competitive procurements, it failed to nego- tiate with all bidders in a competitive range. Actions taken The Service has emphasized to.the operating employees its policy of strict adherence to Federal Procurement Regulations regarding the publicizing of pro- posed procurements and the solicitation of proposals. The Service has also begun to negotiate with bidders in those cases believed to warrant such action. Proposal evaluation Finding The Service used standard evaluation criteria for competitive procurements. Evaluation criteria are used to determine the specific areas of effort in which competing sources will be rated comparatively, The Service applied the criteria uniformly to all projects without regard to the differing elements of individual projects and the relative degree of importance of each element. 2 B-164031(3) Actions taken The Service has revised its evaluation criteria and the forms upon which evaluations of proposals are documented. Postaward contract administration Findings Postaward administration of contracts was inadequate and was limited to the processing and payment of contractor's invoices and vouchers. Fixed-price contracts included a provision for automatic progress payments. Payments made to voluntary nonprofit organizations for the settlement of Cuban refugees were not adequately verified. Also payments at maximum consultant rates were made automatically to certain experts. Action taken The Service included a new provision in all contracts requiring progress and financial reports during the contract performance. In addition, progress payments under fixed-price contracts were limited to small business concerns experiencing financial hardships. The Service also planned to verify all con- sultant rates before the rates were paid and to audit the payments made to voluntary nonprofit organizations for the settlement of Cuban refugees. Documentation Finding Documentation of contract files was inadequate. Nearly all the contract files lacked evidence to indicate that any negotiations had been conducted by the contracting officer by telephone, correspondence, or conferences. Contract files did not contain memorandums of negotiations, records of the history of the procurement or background data, or documentation of business judgments lead- ing up to and supporting the award of contracts. Actions taken The Service has developed or improved forms for documenting certain as- pects of the contract-award process. For example, the Service has developed a form to document all negotiations with prospective contractors. In addition, as part of its efforts to improve methods for evaluating contract proposals, .the Service revised its forms to document the differing elements of individual project proposals and included a narrative section to explain and support the rationale for selecting contractors. 3 ” 1 . . . , B-164031(3) We have not evaluated the actions taken or planned by the Service on the recommendations contained in the HEWreport. Officials in the Office of the Assistant Secretary responsible for conducting the study and issuing the report, however, expressed satisfaction as to the status of this matter. They also plan to perform a follow-up survey late in October 1971. As part of our ongoing reviews of HEW activities, we intend to keep abreast of the progress being made by the Service in improving its procurement practices. We trust that the above information will serve the purpose of your inquiry. Sincerely yours, DsPatl%TComptroller General of the United States The Honorable John F. Seiberling House of Representatives
Contracts Awarded by the Social and Rehabilitation Service of the Department of Health, Education, and Welfare on a Noncompetitive Basis
Published by the Government Accountability Office on 1971-08-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)