Pressure on Procurement Agents

Published by the Government Accountability Office on 1971-11-16.

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

                                   CQMP’I-ROLLER         GENERAL.    OF THE
           -        _ ,. I   _ _. .                    WASHINGTON,   D.C

q      Dear    Senator        Proxmire             :
             This is in response           to your letter         of August 27, 1971,
       in which you requested          that we initiate           a preliminary       inquiry             !
     / at the Defense Industrial             Supply Center         (DISC),   Philadelphia,
    / Pennsylvania,      to determine          whether     excessive      Government      spend-
       ing was occurring      as a result           of pressure      being exerted        upon
       the procurement     agentsr e qutoe s process
                ~mrG7w..ay ybr               t e d , we an    average 40 contracts           each
       week .-                                           looked into the-work           load of
       the buyers and the effects              that prolonging         the processing        time
       would have on costs.

              In making our inquiries       we held discussions    with respon-
       sible    DISC officials     and examined performance     and other per-
       tinent    records    at DISC.
              Information       that we obtained         shows that during         1969 group
       performance       standards      were established         by type of award for
       each of DISC’s three procurement                divisions.       The standards
       were developed        to measure the productivity              of a procurement        di-
       vision    as a unit.        When factored,        the standards      equated to
       about 42 awards each week for one procurement                     division,     24
       awards for another          division,     and 29 awards for the third            divi-
       sion.     We were advised          that the difference         in the standards
       was attributable         to the complexity          of buys being processed         by
       the divisions.         As complexity       increases       the weekly standard
       number of awards to be processed                is lowered.
               In April    1970 the three procurement        divisions       were reor-
       ganized    into two.      Subsequently     DISC personnel       performed    a
       detailed     work-measurement     analysis     and issued new standards
       which became effective         on May 1, 1971.       The new standards
       equate to 32 awards for one division             and 36 awards for the
       other division,
               We were advised       by the Director     of                     Procurement    and Pro-
       duction      that the productivity      standards                        established    for the
       divisions’       buyers were group standards,                            that they measured
       productivity        of a division   as a whole,                        and that they could not
       be applied       to an individual    buyer.     He                     stated     that a produc-
       tivity     evaluation    of each buyer was not                          made.
              Consequently      we were unable to obtain          weekly productivity
       information     for an individual         buyer.    The information      accumu-
       lated    on a divisional       basis,    however,   showed that,     for fiscal
       years 1969 through         1971, the procurement        divisions    achieved    or
       exceeded their       established      effectiveness     rate.     We also found

                                            50 TH ANNIVERSARY 1921- 1971'

that,     during    fiscal       year 1971, about 98,600,           or 88.9 percent,
of the     procurement          actions     processed     at DISC were under $2,500,
which     allowed     the     use of simplified          small purchase    procedures.
These     procedures         permit     buyers    to obtain    bids orally    and to
process       the award       by issuing       a purchase     order or by using some
other     appropriate         purchasing       procedure.

        Further   we prepared      an analysis      of the number of awards
made during      August 1971 by 72 of the 143 buyers assigned                to
the two procurement        divisions.       (There were 80 buyers       in one
division      and 63 in the other division.)              The analysis  showed
that,     in one division,      19 of 40 buyers exceeded the effective-
ness rate.       In the other division         25 of 32 buyers exceeded the
effectiveness      rate.    On a total     basis      the achievements    for the
month of August 1971 were about 95 percent                  and 116 percent,
respectively,      of the divisions’        effectiveness       rates.
        From December 1967 through          June 1971, the number of
line-item     awards processed        showed a slight     decrease.    We noted,
however,    that,    regardless      of the work load to be processed         by
the buyers during        progressive      6-month periods     ending December
and June, the work-load           on hand at the end of the period         re-
mained fairly       constant.      Records at DISC show that since De-
cember 1967 the number of procurement              personnel    has gradually
decreased     from 437 to a current          level of 365.     This decrease
may account      for the stability        of the work load.
         The union representative         for procurement
                                                -~    ~-    ---. personnel
                                                                      ,I ,lr~... told
us that no grievances          had been filed      recently      by any procure-
ment agent concerning          pressure    being applied       to award a spe-
cific      number of contracts.         The representative        added that
grievances       regarding    pressure    had been filed       several       years
ago but that,        when they were brought        to the attention             of DISC
officials,       the practice     of applying    pressure      was discontinued.
        We also inquired      as to the effect      that prolonging        the
time for awarding         a contract    might have on procurement          cost.
DISC officials       informed     us that this would necessitate           a
greater    investment      in inventory     because of the additional
time it would take to replenish             stocks  and would re’sult        in
either    an increase      in processing      costs or an increase       in the
contract     award backlog.        DISC officials     believe     that the
prices    paid by DISC for the items themselves               would not be


       Almost      90 percent    of the procurement        actions    processed
at DISC are awarded as small purchases                under $2,500,        and many
others    are awarded under the formally             advertised      method of
procurement.          On January    29, 1971, we issued         a report    to the
Congress     entitled     “Fair   Prices    Paid for Small Purchases           by
Department      of Defense”      (B-162313)     which included       purchases
made by DISC.

         The report,       which covered small purchases            awarded during
the period        January     1 through    March 31, 1969, stated          that sig-
nificant       instances      of overpricing     were not noted during            the
review,      and we generally         found that small purchases           were
fairly     priced.       It should be noted that the period              covered by
the report        is within     the same period      covered    in the attach-
ment to your letter.              In view of our recently         reported      find-
ings,     we did not at this          time perform    a detailed      review      of
current     procurements        from the standpoint       of the reasonable-
ness of prices         paid.
        In view of the preponderance     of small purchases          at DISC,
our findings     that these are generally       fairly    priced,    and the
ability    of a large number of buyers at DISC to meet or exceed
the standards      established by the command, we believe            that pro-
longing    the time for processing   awards is not warranted             and
that it would have no significant        effect       on prices   paid.

       We plan to make no further         distribution    of this    report
unless    copies are specifically       requested,     and then we shall
make distribution      only after    your agreement      has been obtained
or public     announcement   has been made by you concerning            the
contents     of the report.      If we can be of further       assistance,
please    let us know.
                                                 Sincerely     yours,

                                                 Comptroller   General
                                                 of the United   States

The Honorable      William     Proxmire
United States      Senate