oversight

Contract Award Procedures and Practices of the Office of Economic Opportunity Need Improving

Published by the Government Accountability Office on 1971-12-15.

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

                     CONGRESS ..---
                                i




Contract Award
Proced u res And ractices
Of The
Of Economic Opportunity
 eed Im praving 8-130515




BY THE COMPTROLLER GENERAL
OF’ THE UNITED STATES
                         COMPTROLLER      GENERAL     OF     THE      UNITED   STATES
                                        WASHINGTON.    DC.         2OS48




          B-130515




          To the     President   of the Senate     and the
L\        Speaker      of the House   of Representatives
     //
                  This is our report    pointing   out that contract                         award     pro-
          cedures     and practices  of the Office    of Economic                          Opportunity
          need improving.

                  Our review  was made pursuant       to the Budget    and Account-
          ing Act,   1921 (31 U:S.C.    53), and the Accounting     and Auditing
          Act of 1950 (31 U.S.C.     67).

                  Copies   of this     report  are         being  sent to the Director,                  Of-
          fice of Management           and Budget,          and to the Director,     Office               of
          Economic      Opportunity.




                                                           Comptroller                General
                                                           of the United              States




                                  503-H ANNIVERSARY                   1921-    1971
I
 I           , COtiTROLLER GENERAL'S                                     CONTRACT AWARD PROCEDURES AND PPVKTICES OF THE
i              REPORTTO THE CONGRESS                                   I OFFICE OF ECONOMIC OPPORTUNITY NEED IMPROVING /--
                                                                     ;   B-130515                                       29


I
I
              DIGEST
              -_-_--
 I
 I
              WHYTHE REVIEW WASh?!DE
 I
                     The Office        of    Economic   Opportunity                  (OEO) has broad              authority         to enter
                     into    contracts        and agreements      with               public   agencies            and with         private
                     organizations           and persons    to carry                 out antipoverty              programs.           OEO
                     contractors

                            --perform     evaluations,          research,            and other       studies;

                            --provide     training,         technical            assistance,        and logistical             and other
                                program   support        services;

                            --operate     QEO programs,              projects,        and facilities;              and

                            --supply    computer         services,         publications,            and related          support        items
                               and services.

                      In fiscal     years       1969 through 1971,                   OEO awarded          about     600 contracts           totaling
                      $170 million.            (See pp. 5 and 6.)

                     Because OEO has been spending               a significant        amount of funds on contracts
                     each year and because OEO has been awarding                      a large     number of its contracts
                     in the final      month of the fiscal           year--when       time constraints          can result
                      in contract     award problems--        the General       Accounting     Office       (GAO) has reviewed
                     the adequacy      of the policies,          procedures,       and practices        used*ljy-OEO     -in"-"“'
                     awardis-fiscal        years   1969 and 1970 contracts               and has aiven particular               at-
                     teFtion     to the effects     of fiscal        year-end      time constraints          on contracts
                     awarded     in June.     Subsequently         GAO made a follow-up           review     of OEO's fiscal
                     year 1971 contracting         activities,         to ascertain       whether      improvements       had been
                     made in OEO's contracting            procedures.          (See p. 6.)


     I        FINDINGS AND CONCLUSIONS
     I
                      Year-end contracting

                      Traditionally           OEO has awarded a large                      volume    of    contracts          in    June,      the   final
                      month of the          fiscal  year.

                      In June 1969 OEO awarded 149. or 45 oercent.        of the 332 contracts       awarded
                      throughout    fiscal    year 1969.-  The J&e awar& amounted       to $22.7 million,
                      or 18 percent,       of the $128.4  million for all new contracts     awarded    in fis-
                      cal year 1969.




         I
         I     Tear Sheet
         I
June 1970 awards represented 56 percent of the 169 contracts            awarded by
OEO throughout fiscal year 1970 and 69 percent of the $22.9            million for
all 1970 new contracts,   (See p. 9.) GAO's follow-up review            showed that
a large percentage of contracts still  were being a$/arded in          June 1977.
(See p. 11.)

A combination of circumstances has resulted in OEO's disproportionately
large volume of June contract awards. (See pp. 8 to 10.)

   --Program offices were not submitting       their   procurement   requests until
      late in the fiscal year.

   --Many June contracts were for activities of a continuing nature and
     were being reawarded in the final month of each fiscal year.

   --Late enactment of OEO appropriation        laws caused a delay in funding
      new projects.      OEO had authority,   however, to fund continuing
      activities    until appropriations    were received.

Submission   of contractors’   proposah
                                                                                      I
OEO did not always allow prospective contractors   sufficient    time for prep-       I
aration of proposals --in some cases less than 10 calendar days. The short            I
                                                                                      I
periods allowed by OEO for preparation of proposals in some cases tended to           I
restrict  the number of contractors'  proposals.  Also insufficient     time might    ;
cause contractors  to submit higher cost proposals than they otherwise might          I
submit if given more time to develop their proposals.

Generally, for contracts awarded in June 1971, the periods allowed by OEO
for the preparation of proposals showed significant  improvement over the
periods allowed for contracts awarded in June 1969 and June 1970; gener-
ally the contractors  were allowed between 20 and 29 days.   (See p. 12.)

Evahation of contractors'      proposals
                                                                                      I
The high level of activity    involved in fiscal year-end contracting lessened        I
OEO's ability  to evaluate adequately the strengths and weaknesses of pro-
spective contractors   and their proposals.
For example, as of June 22, 1970, a total of 18 proposals had been sub-
mitted to OEO by prospective contractors    bidding on two contracts to provide
training   and technical assistance services costing about $1.1 million.   In         I
                                                                                      I
less than 48 hours, the regional office that had requested the contracts              I
completed its technical evaluation of the 18 proposals and recommended two            I
contractors,   both of which had performed similar work in the region the             I
                                                                                      I
preceding year.
                                                                                      i
                                                                                      I
Members of one of the regional office evaluation panels informed GAO that
they had spent only 2-l/2 hours evaluating the proposals.   On June 30,               I
                                                                                      t
1970, OEO awarded contracts to the two contractors recommended by the re-             I
gional office.                                                                        I
                                                                                      I




                                           2                                          I
                                                                                      I
               OEO has sought      to improve the technical                  evaluation       process    in     its      re-
               gional    offices   by issuing instructions                  containing       comprehensive            review
               procedures.       (See pp. 17 and 18.)

               Contract
               _____          negotiating       practices

               OEO did not always            include    in the negotiation            process    all    contractors      that
               had submitted         responsive      proposals       determined       to be in a competitive           range
               although      required      to do so by the Federal              Procurement       Regulations.        A Comp-
               troller     General      decision     of August       1970 specifically          pointed      to the need
               for OEO to improve            its procurement         procedures.         GAO noted,      for contracts
               awarded     in June 1971, that there               had been a marked increase               in the negotia-
               tions    held with contractors             submitting       responsive       proposals,+        (See p. 20.)

               Determining          contractors'      responsibleness

               Prior     to the award of many of its contracts,                OEO did not determine          ade-
               quately--contrary          to the Federal        Procurement    Regulations--whether          pro-
               spective      contractors       possessed     the technical     and financial        capacity    to
               perform     proposed      contracts     or were eligible      to receive       such contracts
               under applicable          Government      laws and regulations.

               For instance,         on June 27, 1969, OEO awarded a contract                   for recruiting
               medical       employees     to an organization        incorporated         under a name dif-
               ferent     from that       shown on the contract         document and not authorized              to            do
               business       in the State where its principal               offices      were located.        OEO
               did not obtain          organizational      or financial        information       on the corporate
               entity      to which it awarded the contract,               and, because        of the existing
               uncertainties,          OEO terminated      the contract        for the convenience         of the
               Government        in August       1969 at a cost of $28,550.

               Several  other    instances     were noted by GAO in which OEO had not determined
               the adequacy    of contractors'       accounting  systems and related financial
               controls  prior     to awarding     contracts.   (See pp. 22 to 25.)


  RECOMMENDATIONS
                OR SUGGESTIONS

               OEO should:

                  --Require          program and regional         offices       to   prepare    annual    procurement
                     plans        that show their   contract         needs for         each fiscal     year quarter.

                  --Stagger         contract     performance    periods   so that  contracts              for     continuing
                     activities         will   reach completion       in months other    than           June.
                  --Allow     prospective      contractors          sufficient    time       to develop   and          submit
                     proposals      and require      adequate        OEO evaluations           of the proposals
                     submitted.

                  --Include      in     the negotiation        process      all contractors     that have              submitted
                      responsive        proposals     determined       to   be in a competitive      range.


Tear   Sheet
                                                                            3
      --Make all reasonable    efforts,  prior   to contract    award, to determine
         the responsibleness   of prospective    contractors.     (See p. 27.)


AGEIJCY
      ACTIONSAND--UNRESOLVED
                          ISSUES
    OEO recognized the problems and stated that measures had been taken to
    strengthen OEO's contract process.   OEO has convened a high-level task
    force to reexamine and assess OEO's planning process, as tie11 as the
    various phases associated with project definition,  project management, and
    source solicitation  and selection.   (See p. 27.)


MATTERS
      FORCONSIDERATION
                    BY THECONGRESS
    This report is being submitted to the Congress in view of its continued
    interest    in OEO activities in general and because several committees and
    members of Congress have expressed specific    interest in OEO's contract-
    ing activities.




                                           4
                           Contents
                                                               Page

DIGEST                                                           1

CHAPTER

       1   INTRODUCTION                                          5
               Scope of review                                   6

       2   NEED FOR IMPROVEMENTSIN CONTRACTING PRO-
           CEDURESAND PRACTICES                                  8
               Large volume of fiscal      year-end con-
                  tracting                                       8
               Insufficient    time allowed for submis-
                  sion and evaluation     of contractors'
                  proposals                                     12
               Negotiations    not held with all con-
                  tractors  submitting    responsive    pro-
                  posals                                        20
               Inadequate determinations       of prospec-
                  tive contractors'    responsibleness          22

       3   CONCLUSIONS, RECOMMENDATIONS,AND AGENCY
           COMMENTS                                             26
              Conclusions                                       26
              Recommendations                                   26
              Agency comments                                   27

APPENDIX

       I   Letter dated August 9, 1971, from the Deputy
             Director, Office of Economic Opportunity,
             to the General Accounting Office                   29

  II       Principal    officials of the Office of Eco-
              nomic Opportunity   responsible  for activ-
              ities  discussed in this report                   34

                             ABBREVIATIONS

GAO        General    Accounting   Office

OEO        Office    of Economic Opportunity
. COkTROLLER GENERAL'S                                  CONTRACT AWARD PROCEDURES AND PRACTICES OF THE
  REPORTTO THE CONGRESS                                 OFFICE OF ECONOMIC OPPORTUNITY NEED IMPROVING
                                                        B-130515


  DIGEST
 -_--       --


 WHYTHE REVIEW WASM4DE

       The Office     of     Economic Opportunity                   (OEO) has broad              authority          to enter
       into contracts         and agreements    with                public   agencies            and with         private
       organizations         and persons    to carry                out antipoverty              programs.            OEO
       contractors

           --perform     evaluations,          research,            and other       studies;

           --provide     training,         technical            assistance,        and    logistical          and other
               program   support        services;

           --operate     OEO programs,              projects,         and facilities;             and

           --supply    computer         services,         publications,            and related          support        items
              and services.

       In fiscal     years      1969 through 1971,                  OEO awarded          about     600 contracts           totaling
       $170 million.          (See PP. 5 and 6.)

       Because OEO has been spending                 a significant        amount of funds on contracts
       each year and because OEO has been awarding                        a large     number of its contracts
       in the final        month of the fiscal           year--when       time constraints         can result
       in contract       award problems--         the General       Accounting     Office       (GAO) has reviewed
       the adequacy        of the policies,          procedures,       and practices        used by OEO in
       awarding     fiscal     years   1969 and 1970 contracts               and has given particular            at-
       tention    to the effects        of fiscal        year-end      time constraints          on contracts
       awarded    in June.        Subsequently        GAO made a follow-up            review     of OEO's fiscal
       year 1971 contracting           activities,         to ascertain       whether      improvements       had been
       made in OEO's contracting               procedures.         (See p. 6.)


 FINDINGS AND CONCLUSIONS

       Yem-end contracting

       Traditionally         OEO has awarded               a large        volume    of     contracts         in    June,       the   final
       month of the        fiscal  year.

       In June 1969 OEO awarded        149, or 45 percent,   of the 332 contracts       awarded
       throughout    fiscal    year 1969.    The June awards amounted      to $22.7 million,
       or 18 percent,       of the $128.4   million  for all new contracts     awarded    in fis-
       cal year 1969.
June 1970 awards represented             56 percent    of the 169 contracts     awarded   by                     '   1
OEO throughout       fiscal    year 1970 and 69 percent        of the $22.9 million     for
all   1970 new contracts.           (See p. 9.)     GAO's follow-up   review    showed that
a large   percentage        of contracts    still   were being awarded      in June 1971.
(See p. 11.)

A combination          of circumstances        has resulted           in OEO's disproportionately
large  volume        of June contract         awards.     (See        pp. 8 to 10.)

   --Program     offices    were not         submitting       their     procurement     requests     until
      late in    the fiscal     year.

   --Many    June contracts          were for activities              of a continuing      nature    and
      were   being reawarded          in the final     month          of each fiscal     year.

   --Late      enactment     of OEO appropriation      laws caused a delay in funding
      new projects.          OEO had authority,      however,    to fund continuing
      activities       until   appropriations     were received.

Submission      of    contractors’        proposals

OEO did not always allow        prospective    contractors       sufficient      time for prep-
aration    of proposals   --in  some cases less than 10 calendar             days.    The short
periods    allowed   by OEO for preparation       of proposals         in some cases tended       to
restrict     the number of contractors'      proposals.        Also insufficient        time might
cause contractors       to submit   higher  cost proposals         than they otherwise       might
submit   if given more time to develop         their    proposals.

Generally,       for contracts     awarded    in June 1971, the periods       allowed     by OEO
for the preparation          of proposals     showed significant     improvement      over the
periods     allowed    for contracts      awarded     in June 1969 and June 1970; gener-
ally    the contractors        were allowed     between    20 and 29 days.    (See p. 12.)

Evahation       of    contractors     ’ proposah

The high level        of activity    involved     in f iscal    year-end    contracting               lessened
OEO's ability       to evaluate     adequately      the strengths       and weaknesses              of pro-
spective    contractors       and their    proposals

For example,       as of June 22, 1970, a total                of 18 proposals      had been sub-
mitted     to OEO by prospective          contractors        bidding     on two contracts     to provide
training     and technical       assistance       services       costing    about $1.1 million.        In
less than 48 hours,          the regional       office     that     had requested    the contracts
completed      its technical      evaluation        of the 18 proposals          and recommended     two
contractors,       both of which had performed               similar     work in the region      the
preceding     year.

Members of one of the regional     office   evaluation     panels  informed    GAO that
they had spent only 2-l/2    hours evaluating       the proposals.      On June 30,
1970, OEO awarded  contracts    to the two contractors        recommendedby the re-
gional  office.



                                                          2
    OEO has sought to improve the technical evaluation process in its re-
    gional offices by issuing instructions  containing comprehensive review
    procedures.   (See pp. 17 and 18.)

    Contract   neqotiatinq   practices

    OEO did not always include in the negotiation    process all contractors    that
    had submitted responsive proposals determined to be in a competitive      range
    althouqh required to do so by the Federal Procurement Regulations.       A Comp-
    troller  General decision of Ausust 1970 soecificallv   pointed to the need
    for OEO to improve its procurement procedures.      GAO-noted, for contracts
    awarded in June 1971, that there had been a marked increase in the negot ia-
    tions held with contractors  submitting responsive proposals.      (See p. 20 l /

    Determining   contractors’    responsibZeness

    Prior to the award of many of its contracts,   OEO did not determine ade-
    quately--contrary   to the Federal Procurement Regulations--whether    pro-
    spective contractors possessed the technical and financial     capacity to
    perform proposed contracts or were eligible   to receive such contracts
    under applicable Government laws and regulations.

    For instances on June 27, 1969, OEO awarded a contract for recruiting
    medical employees to an organization    incorporated under a name dif-
    ferent from that shown on the contract document ancl not authorized to do
    business in the State where its principal     offices were located.    OEO
    did not obtain organizational   or financial   information on the corporate
    entity   to which it awarded the contract,   and, because of the existing
    uncertainties,   OEO terminated the contract for the convenience of the
    Government in August 1969 at a cost of $28,550.

    Several other instances were noted by GAO in which OEO had not determined
    the adequacy of contractors' accounting systems and related financial
    controls prior to awarding contracts.    {See pp. 22 to 25.)
                                           d
RECOi?BEiVEA~IOiUS
                OR SUGGESTIONS
    OEO should:
                                    P
      --Require program and regional offices to prepare annual procurement
         plans that show their contract needs for each fiscal year quarter.

      --Stagger contract performance periods so that contracts for continuing
         activities will reach completion in months other than June.

      --Allow prospective contractors  sufficient  time to develop and submit
         proposals and require adequate OEOevafuations of the proposals
         submitted.

      --Include in the negotiation   process all contractors  that have submitted
         responsive proposals determined to be in a competitive    range.


                                                    3
      --Make all reasonable           efforts,    prior     to contract      award,    to determine
         the responsibleness          of prospective        contractors.       (See    p. 27.)


AGENCYACTIONS AND UNRESOLVED
                           ISSUES

    OEO recognized          the problems    and stated     that measures          had been taken to
    strengthen        OEO's contract     process.      OEO has convened           a high-level      task
    force    to reexamine       and assess OEO's planning             process,      as well    as the
    various     phases associated        with project      definition,         project    management,      and
    source     solicitation      and selection.        (See p. 27.)


kMTTERS FOR CONSIDERATIaNBY THE CONGRESS

    This report     is being submitted       to the Congress       in view of its continued
    interest     in OEO activities      in general     and because     several  committees    and
    members of Congress         have expressed     specific   interest     in OEO's contract-
    ing activities.
                                CHAPTER2

                              INTRODUCTION

     Overall authority   of the Office of Economic Opportunity
to enter into contracts    is contained in section 602 (n> of
the Economic Opportunity     Act, as amended (42 U.S.C. 29421,
which authorizes  the Director,    OEO, to:    .

      I'*** establish     such policies,     standards,     crite-
      ria, and procedures,       prescribe    such rules and
      regulations,     enter  into   such   contracts    and
      agreements with public agencies and private                or-
      ganizations     and persons, make such payments (in
      lump sum or installments,         and in advance or by
      way of reimbursement,        and in the case of grants,
      with necessary adjustments         on account of over-
      payments or underpayments),          and generally     per-
      form such functions      and take such steps as he
      may deem to be necessary or appropriate             to carry
      out the provisions      of this Act."

       As permitted     by the above authority,       OEO enters into
numerous contracts       each fiscal     year.  Although contract        pur-
poses vary widely,        in general,    OEO contractors      (1) perform
evaluations,     research,    and other studies,      (2) provide train-
ing, technical      assistance,    logistical    and other program sup-
port services,      (3) operate OEO programs, projects,            and facil-
ities,   and (4) supply computer services,           publications,      and
related   support items and services.          Most of OEO's contracts
are awarded on the basis of competition             and negotiations
with competing contractors.

       Within OEO the Procurement         Division   has been delegated
the authority     to enter into and       administer   contracts,   In
carrying    out this responsibility,         the Procurement Division
operates in accordance with the           Federal Procurement Regula-
tions which are supplemented by           its own procurement policies
and procedures.

      Contracts are planned by OEO program and regional     of-
fices and are initiated    through the development of procure-
ment requests which are forwarded to the Procurement Division
for processing.    The major steps in processing   a procurement

                                      5
request include (1) the preparation     and distribution     of re-
quests for proposals,   (2) the receipt   and technical     evalua-
tion of proposals submitted by competing contractors,         (3)
the negotiation  with all responsible    offerors    within  a com-
petitive  range, and (4) the selection    of a qualified     con-
tractor  that can meet the Government's need for the least
amount of money.

     The extent to which OEO entered into contracts    during
the last 3 fiscal years is shown in the following   table.

             Fiscal          Number               Amount
              year        of contracts        (000 omitted)

              1969               332               $128,431
              1970               169                 22,856
              1971               104                 19,251

The level of OEO contracting      decreased significantly    in
fiscal  year 1970, primarily    because the administration      of
certain  OEO programs, such as Job Corps and Head Start pro-
grams, was transferred    from OEO to other executive      agencies.
Our survey of OEO's contracting       activities  showed that a
large number of its contracts       were being awarded in the
final month of the fiscal     year.

SCOPEOF REVIEW

       The purpose of our review was to evaluate                 the adequacy
of OEOss policies,          procedures,     and practices    in awarding
contracts,      particularly       with respect to (1) the solicitation
of proposals       from prospective        contractors    and OEO's technical
evaluation      of resulting      proposals,      (2) the amount of compe-
tition    sought by OEO prior to executing negotiated                contracts,
and (3) the selection           of qualified      and responsible    contrac-
tors.     Particular      attention     was given to contracts       awarded
in June and to problems associated               with June contracting.

       Our review was made at OEO headquarters       in Washing-
ton, D.C.,where    we analyzed pertinent    data on contracts
awarded during fiscal      years 1969 and 1970. We reviewed in
detail   OEO's contracting     actions on selected contracts
awarded during the 2 years and considered applicable           OEO and
other contracting    laws and regulations.      We interviewed

                                       6
officials     of OEO's Procurement Division      and the OEO program
offices    that had initiated    the contracts    cited in this re-
port.     Also we made a follow-up     review of OEO's fiscal    year
1971 contracting     activities,    to ascertain   whether improve-
ments had been made in OEO's contracting          procedures.

       In addition    to making a review of OEO's contract       award
procedures and practices,       we have  made detailed   reviews    of
OEO's management of contracts       for evaluations    and other
studies and for training       and technical  assistance    services.
The results     of these two reviews will be the subjects of
separate reports.




                                   7
                                CHAPTER2

                      NEED FOR IHPROVEXENTSIN

              CONTRACTINGPROCEDURESAND PRACTICES

      OEO awarded a large proportion          of its   contracts    during
the final month of the fiscal   year.
       Time constraints     caused by June contracting         resulted
in OEO's not allowing       sufficient      time for contractors      to
prepare proposals,      which, in turn, restricted         the number of
contractors    willing   to submit proposals.          Also short time
periods for contractors       to prepare proposals,        according to
the Federal Procurement Regulations,            might cause contractors
to submit higher cost proposals           than they otherwise     might
submit if given more time to develop their proposals.                  The
fiscal   year-end contracting        also limited    the time available
to OEO for evaluating       contract     proposals.

      Other weaknesses in OEO's contract-awarding              process,
not necessarily    attributable       to the high volume of fiscal
year-end contracting,       included OEO's failure         to negotiate
with all prospective       contractors     within a competitive       range
and OEO's inadequate preaward efforts              to determine the re-
sponsibleness   of prospective        contractors.

LARGE VOLUME OF FISCAL YEAR-END CONTRACTING

       OEO traditionally     has awarded a large volume of con-
tracts    in June, the final month of the fiscal     year.   June
contracting    in the first    few years of OEO's existence    may
have resulted      because of the newness and inexperience     of
the agency and, in part, because of OEO's desire to utilize
all appropriated       funds to combat poverty before they became
unavailable    for obligation    after the close of the fiscal
year for which they had been appropriated.

      In more recent years, however, a combination       of circum-
stances has resulted    in the award of a disproportionate
volume of OEO contracts    in the final month of the fiscal
year.   OEO's level of contracting     for fiscal years 1969
and 1970 is shown in the following       table.


                                     8
                                         OEO contract      awards
                                                (note a)                  -
                                                      Amount
                           Number       Percent     (millions)    Percent

Fiscal     year 1969:

     All    contracts

     Other than June
       contracts              183          55        . 105.7          82
     June contracts           149          45           22.7          18

Fiscal     year 1970:

     All    contracts                                $ 22.9

     Other than June
       contracts               75          44            7.0          31
     June contracts            94          56           15.9          69

aContract awards include only new contracts  awarded and do
 not include contract  modifications or amendments.

        One of the circumstances    that caused increased June
contracting    was that OEO program offices      were submitting
their contract    requirements   late in the fiscal    year.     To
illustrate,    184, or 76 percent,     of the total  243 contracts
awarded in June 1969 and 1970 resulted        from procurement
requests that were received by the Procurement Division             in
May or June, the final      2 months of the fiscal    year.

      In April 1971 the Associate Director       for Administra-
tion said that this had occurred because there was no for-
mal procurement planning system within        OEO to require all
program and regional   offices    to develop and follow a fund-
ing plan which would identify,      by fiscal   year quarters,   the
procurement requirements     of the agency.

      Another circumstance     that has led to increased June
contracting   is that OEO contracts     usually are awarded for
a l-year period.     Contracts    for continuingtypesof      activi-
ties that are awarded in June of one fiscal          year will be
reawarded in June of the following        fiscal   year.  This

                                    9
situation    has had a multiplying  effect  on OEO's level of
June contracting    and partially  explains  the increase be-
tween fiscal    year 1969, when 45 percent of all contracts
were awarded in June, and fiscal     year 1970, when 56 percent
of all contracts    were awarded in June.

        A factor which OEO officials       cited as having a bearing
on fiscal      year-end contracting     was that the Congress had
appropriated       OEO funds several months after the fiscal      year
had begun.       The following    table shows OEO's appropriation
history     for fiscal years1965 through 1971.

                                                                    Months
                           Appropriation                           remaining
Fiscal          Date Congress             Amount                     in the
 year             approved          (000,000 omitted)            fiscal    year

 1965           Oct.    7,   1964             $      800               9
 1966            II    31,   1965                 1,500                8
 1967            I1    27,   1966                 1,687                8
 1968           Jan.    2,   1968                 1,773                6
 1969           Oct.   11,   1968                 1,948                9
 1970           Mar.    5,   1970                 1,948                4
 1971           Jan.   11,   1971                 1,323                6

       To enable OEO to continue its operations                 in the new
fiscal    year, the Congress has given OEO limited                authority
to obligate      funds until     appropriations       for the new year are
approved.       Under this continuing        authority     funds can be
obligated     for continuing       projects   or activities       which were
conducted in the previous fiscal             year.      Therefore the late-
ness of congressional         action on OEO's appropriation            bills
should not have necessitated             the high level of fiscal         year-
end contracting,        especially     in fiscal    year 1970 when OEO's
budget request did not contain any major new programs or
any signficant       increases     in funds over the prior year's
budget request.

       In April 1971 OEO's Deputy Director          informed us that,
although continuing      funding authority      technically      had per-
mitted OEO to fund continuing       projects     and activities,      OEO
had followed    the policy that, until       the Congress appropriated
OEO its funds, contracts       for only the highest priority          proj-
ects would be awarded.

                                      10
         In commenting on a draft of this report,     OEO, in a
letter     dated August 9, 1971, stated that:

         "During the past fiscal   year, we believe that
         there was a noticeable   decrease in the percentage
         of contract  awards in June.    Our contract  award
         statistics  for Fiscal Year 1971 disclose    that 33
         percent of our contracts   were awarded during the
         month of June compared to 56 percent in Fiscal
         1970 ***."

      The OEO contract   award statistics      for fiscal   year 1971,
which showed that 33 percent of the contracts           were awarded
during the month of June, included,         in addition   to new con-
tract awards, contract    modifications      and amendments.    Our
analysis    of OEO's new contract    awards showed that 55, or
53 percent,    of 104 new contracts     were awarded in June 1971.
This is comparable to the 56 percent of new contracts
awarded in June 1970.




                                   11
INSUFFICIENT TIME ALLOWEDFOR
SUBMISSION AND EVALUATION
OF CONTRACTOR'S PROPOSALS

        OEO did not always allow prospective        contractors    suffi-
cient time to develop and submit proposals,            and we found
evidence that this had restricted           the number of contractors
willing    to submit proposals,       Also failure   to allow con-
tractors     sufficient     time for preparation   of proposals might
cause contractors        to submit higher cost proposals than they
otherwise might submit if given more time to develop their
proposals.        In addition,   the high level of activity     involved
in fiscal     year-end contracting      lessened OEO's ability     to
adequately evaluate the strengths           and weaknesses of prospec-
tive contractors        and their proposals.

Submission   of contractors'     proposals

       The Federal Procurement Regulations      do not specify min-
imum time periods for contractor     submission of proposals to
be used as a basis for contract     negotiations,     For formally
advertised   procurements,  however, the regulations     state
that :

      "As a general rules bidding time shall be not less
      than 15 calendar days when procuring       standard com-
      mercial articles    and services and not less than 30
      calendar days when procuring      other than standard
      commercial articles    or services,"

       Although OEO generally    has procured other than standard
commercial articles     and services,    the periods allowed con-
tractors    for submission of proposals during fiscal      years
1969 and 1970 in many cases were less than 30 days.          OEO
awarded a total    of 243 contracts    in June 1969 and 1970, of
which 148 were awarded competitively        rather than on a sole-
source basis.     Our analysis   of the periods allowed by OEO
for preparation    of proposals on 128['] of the contracts       fol-
lows.


'The 20 contracts    not reviewed were for       programs transferred
  to other executive   agencies.    The files     for these contracts
 were not readily    available   at OEO.

                                    12
       Days allowed
    for preparation                            Contracts
*      of proposals         Number       Percent      AnlouRt           Percent

                                              (000 omitted)

        0 to 10                  5             4       $ 1,430               6
       11 to 20                 75            59        12,479              49
       21 to 29                 40            31         9,287              37

            Total             m               94        23,196              92

       30 or over                 8            6         2,036                  8

            Total             128            100       $2,232              pJ
                                                                           --
    Further,  according to the Federal Procurement Regulations,
    adequate time for preparation   of proposals   is necessary be-
    cause undue time limitations  tend to restrict    competition
    and to increase prices.

          The extent of competition     sought and received by OEQ on
    contracts   awarded in fiscal   years 1969 and 1970 is shown in
    the following    table.

                                           Average number of
                                          proposalls for each
                                                 contract
                                          Solicited       Received      Percent

    Fiscal year 1969:
         Other than June contracts             54             10           X8.5     ,
         June contracts                       105              9            8*6
    Fiscal year 1970:
         Other than June contracts            108             15           13.9
         June contracts                       152             If            7.2
                                                                             /
          Examples illustrating      the effects    of short         time periods
    allowed contractors      for preparation     of proposals          follow.
    In a June 19, 1970, letter       to OEO, a prospective             contractor
    responded to two OEO requests for proposals           in       the follow-
    ing terms.




                                        13
      "In connection   with the above items  we have no
      alternative   but to submit a 'No Bid1 in view of:
                                                                         4

            “1 - The short time between date of publi-
                 cation of the above Requests for Pro-
                 posal [RFP], and
            "2 - The date of receipt  of the RFP's, and
            "3 - Due date of the RFP's.

      "Your letter    of submittal    is dated 9 June 1970
      but the notice was not published until        the
      June 12th edition    of the Commerce Business Daily.
      We replied   on the date of the receipt      of the pub-
      lication   which was June 13th.      Your reply submit-
      ting the Request for Proposal and explanatory
      paperwork,   scope of work etc,, was received at
      10:00 AM of 18 June 1970, which meant that we had
      less than two working days to read and analyze
      the requirements,    work out plans for the required
      personnel and to write,      type up and submit our
      proposal to reach your office       by 22 June 1970."

        The contractor   also stated that OEO had 'permitted       too
little    time for any organization     to properly   study and pre-
pare a bona fide proposal and inquired as to why so little
time had been allowed for proposal preparation.            In an Au-
gust 10, 1970, letter       to the contractor,    OEO's contracting
officer     stated that:

     "It is unfortunate    that more time could not have
     been afforded   prospective  contractors     to respond.
     to the referenced    RFPs. The reasons for this in-
     clude funding problems, programmatic        situations
     and the need to obtain a contract       as soon as pos-
     sible,  but during a given fiscal     year."

      Another contractor   expressed its concern over OEO's
level of fiscal   year-end contracting    in a letter    dated
June 26, 1969.    The contractor   stated that,during     3 years
of association  with OEO, each year the procurement activi-
ties had llbecome increasingly    more chaotic."      The contractor
stated that:



                                  14
     'I*** This year during the month of May, OEO is-
     sued hundreds of RFPs. I am well aware that
     every agency has an end-of-year     peak volume of
     procurements   to commit that year's fiscal    funds,
     though I doubt if any agency has the same propor-
     tionate volume with respect to the funds involved,

     "The one or two weeks' response time specified      by
     many of the RFP's does not allow the proposer to
     formulate    and prepare a fully  responsive proposal.
     Nor, due to the volume of RFP's issuing forth si-
     multaneously,    can a proposer respond adequately
     to those in his area of business specialization."

       The contractor    also challenged OEO's ability   to ade-
quately evaluate all the proposals that resulted       from the
many requests for proposals issued late in the fiscal        year.
The contractor     stated that:

     'I*** not only does the current procurement pro-
     cedure place an undue hardship on companies, it
     also does not allow for full and comprehensive
     evaluations    of proposals which are submitted.      I
     am sure that the OEO is sincerely     trying  to eval-
     uate objectively     the responses to each RFP, but I
     cannot imagine that the volume and short time al-
     lowed allows for thorough and thoughtful      evalua-
     tions to be accomplished."

      In commenting on a draft of this report, OEO stated
that it was mindful of its obligation  to allow contractors  a
reasonable time to prepare proposals and that a "minimum bid-
ding time" of 30 days had been observed for 1971 procurements.

      In June   1971 OEO competitively    awarded 31 contracts.
Our review of     the periods allowed by OEO for the preparation
of proposals    for these contracts    showed significant     improve-
ment over the     time allowed for the preparation      of proposals
for contracts     awarded in June of fiscal   years 1969 and 1970.       B

      For contracts awarded in June 1971, only one instance
was noted in which prospective   contractors   were allowed less
than 20 days for the preparation   of proposals,   whereas the
requests for proposals for 55 percent of contracts      awarded

                                   15
in June 1969 and 1970 allowed less than 20 days for the
preparation    of proposals.    We rioted, however, that only 4,,
or 13 percent,    of the 31 requests for proposals had allowed
prospective   contractors    30 days or more for the preparation
of proposals.




                                16
Evaluation    of contractorsD     proposals

      In June 1970 CEO competitively     awarded 52 contracts,   of
which seven, amounting to $1.8 million,      were awarded within
10 calendar days after the final     date for proposal submis-
sion.

      Two of these contracts,     which totaled    about $400,000
and which required  the contractors       to provide extensive    pro-
grams of technical  assistance     to OEO, were awarded on
June 30, 1970, just 5 calendar days after the final          date for
the submission of proposals.       Two other contracts,    which
amounted to about $1.1 million,       were awarded by OEO on
June 30, 1970, just 8 calendar days after the final          date
for the submission of proposals.        The circumstances    sur-
rounding OE09s technical     evaluation     of the latter two con-
tracts are discussed below.

      On May 18, 1970, OEO headquarters         received two procure-
ment requests from one of its regional          offices.     The re-
quests were for one contract      to provide training        and techni-
cal assistance    to Community Action Programs operated in
metropolitan   areas of three States within          the region and
for a second contract    to provide the same services           in non-
metropolitan   areas of three States within          the region.
Under each of the proposed contracts,         the contractors       were
to provide training    and technical    assistance       in various pro-.
gram areas and full-time     leadmen; that is,technical           special-
ists  who would be responsible      for one or more areas of the
desired expertise.

       In seeking to competitively          award the two contracts,
the Procurement Division,        on June 9, 1970, sent about 300
requests for proposals        to prospective      contractors.       Inter-
ested contractors     were allowed only 13 calendar days for
the preparation     and submission of proposals.             By the
June 22 submission cutoff        date, a total of 18 proposals had
been submitted,     consisting    of 11 proposals        for metropolitan
areas and 7 proposals for nonmetropolitan               areas.    On June 23,
1970, the 18 proposals were hand-carried              from OEO head-
quarters   to the OEO regional       office    that had initiated        the
procurement requests to obtain the region's               evaluation     of
the technical    responsiveness      of each proposal.


                                     17
       The 18 proposals were sorted and distributed                  among
se-ven regional    review panels,     each     consisting      of  three    to
five panel members.        The panels had been organized to inde-
pendently evaluate each prospective              contractor@s      proposed
performance,    not including     costs,      within     the  various    func-
tional   areas to be addressed under the contracts.                   By the
morning of June 25, 1970, less than 48 hours after it had
received the proposals,       the regional        office     had completed
its technical    evaluation     of the 18 proposals.             The regional
office   recommended two contractors,            both of which had per-
formed similar     contracts    in this region in the preceding
year.    Although neither     contractor       had submitted the lowest
cost proposal,     on June 30, 1970, the Procurement Division
awarded contracts      to the two contractors            evaluated as techni-
cally superior    by the regional        office.

      Our review did not include efforts         to evaluate how well
the contracts    had been performed.      To determine the basis on
which the regional    office    had recommended the two contractors,
however, we interviewed      the regional   official    who was in
charge of the proposa.1 evaluations       and members of two of the
seven evaluation    panels.

       These officials      informed us that the time allowed to
evaluate all proposals Was totally             insufficient.          The of-
ficial   in charge of the evaluation           informed us that there
were not even enough copies of the proposals to distribute
one to each panel member and that therefore                  panel members
were unable to spend their full            time performing         the evalua-
tion.    One evaluation       panel expressed its position             on the
inadequacy of the evaluation           process to the head of the divi-
sion responsible       for training     and technical        assistance
within   the region.       In a letter     dated July 10, 1970, the
panel representative        stated that:

      19Under the time alloted       for evaluation   the best
      that could be done was to review the Peadmen,
      leadmen statements and generally         scan the pro-
      posals for specific       content.   *** This method
      was not sufficient      to properly    qualify  the
      bidders.     The following     should be considered
      as contributing     factors    to the poor quality
      of evaluation:
       "1.   Insufficient      time to adequately       evaluate   each
             bidder's     proposal ***.

       "2.   There was no opportunity       to properly   evaluate
             the qualifications      of the leadmen either by
             interview    or investigation.     *** Therefore
             we cannot be assured of the validity         of ***
             stated qualifications       of said leadmen.

       "3    The lack of uniform criteria and method to
             properly judge and rate each proposal by
             each team."

       In addition,  members of the above panel informed us
that   they had spent a total  of only 2-l/2 hours in evalua-
ting   the 18 proposals.

        In commenting on a draft of this report,        OEO stated the
belief    that, after issuing instructions     detailing    comprehen-
sive procedures for the review of technical          proposals,    suf-
ficient     time now was being allowed for the evaluation        of
contractor      proposals.  OEO stated also that an average 2
weeks was being expended by OEO regional        staffs    in the
technical      evaluation  process.




                                                    .




                                     19
NEGOTIATIONS NOT HELD WITH ALL CONTRACTORS
SUBMITTING RESPONSIVE PROPOSALS

      OEO did not always include in the negotiation         process
all contractors    which submitted responsive    proposals,      al-
though the Federal Procurement Regulations       require    that
negotiations    be conducted with all responsive     contractors
whose proposals fall within      the competitive  range.

      In fiscal  year 1969 OEO negotiated        with an average of
only 43 percent.of     the contractors     submitting   responsive
proposals   for each contract     awarded.    In fiscal   year 1970
OEO negotiated   with an average of 83 percent of the contrac-
tors submitting    responsive proposals for each contract
awarded.

       With regard to negotiated            contracts,       the Federal Pro-
curement Regulations           state that, after receipt             of initial
proposals,      written    or oral discussions           shall be conducted
with all responsible           offerors   which have submitted proposals
within    a competitive        range and that price and other factors
shall be considered,,           Also the Comptroller          General has stated
that it is a well-established              principle      in Federal procure-
ments that such discussions             must be meaningful and must
furnish     information      to all offerors       within      the competitive
range as to the areas in which their proposals are believed
to be deficient         so that competitive         offerors      are given an
opportunity      to fully      satisfy   the Government's requirements
(47 Comp. Gen. 336 (1967)).

        The principle     was applied by the Comptroller    General
in his August 21, 1970, decision        (50 Comp. Gen. 117) on a
prospective     contractor's    protest against OEO's March 23,
1970, award of a $72,000 contract        to a higher bidder.      The
contractor     which had submitted the lowest bid claimed that
the areas in which its proposal was considered by OEO to be
technically     deficient    had not been set forth fully    in the
request for proposals as requirements         or as evaluation
factors     and that no meaningful negotiations     had taken place
between the contractor        and OEO,

      Although the decision did not reverse OEO's award, it
pointed out various deficiencies      in the procurement procedures
used by OEO, including    the failure   to negotiate  with all

                                       20
bidders which had submitted responsive    proposals and which
were in the competitive   range. The  Director,    OEO,was in-
formed that:

      'l*** we [GAO] must conclude that the subject con-
       tract was awarded under procedures which failed
       to observe established      principles      of negotiated
      competitive    procurement.        Since the contract      was
      completed in June we do not believe it would be
       in the public interest      for this Office to under-
       take remedial action in the matter.            However, we
       are calling   this procurement to your particular
       attention   so that appropriate        action will be
       taken to insure that in future          procurements    the
       RFPs are prepared,      negotiations     are conducted,
       and evaluations     are made in accordance with such
       established   principles    ***."

       In April 1970 OEO issued a series of instructions               de-
signed to improve the overall        administration      of contracts
and grants.     One of these instructions        specifically      ad-
dressed the need for contract        negotiators    to make the selec-
tion of an offeror      and the award of a contract          on the most
competitive    basis practicable.      In addition,      the Director,
Procurement Division,       informed us that, in staff meetings
with contract    negotiators,     he had emphasized the need to
negotiate   with all responsive contractors         and that he was
closely monitoring      this area of the contract-awarding           pro-
cess.

      OEO, in commenting on a draft of this report,       stated
that, for contracts  awarded in fiscal    year 1971, there had
been a marked improvement over previous fiscal       years.    Our
review of the files  of 29 contracts    awarded in fiscal     year
1971 showed only two instances    in which negotiations      had
not been held with all contractors     submitting  responsive
proposals.




                                     21
INADEQUATE DET%RMII;TATIONSOF
PROSPECTIVE CONTRACTORS'RESPONSIBLENESS

       Prior to the award of many of its contracts,        OEO did
not adequately determine,      contrary   to the Federal Procure-
ment Regulations,     whether prospective     contractors  possessed
the technical    and financial   capacity   to perform proposed
contracts    or whether they were eligible      to receive such con-
tract   awards under applicable     Government laws and regula-
tions,

        It     is the Government's policy that contracts        shall be
awarded        only to responsible   prospective   contractors;    the
Federal        Procurement Regulations    describe a responsible      con-
tractor        as one which has:

         --Adequate       financial    resources    for    performance.

         --The necessary         experience,   organization,        technical
            qualifications,        skills,   and facilities.

         --The ability    to comply with the proposed or required
            time of delivery   or performance schedule.

         --A satisfactory         record   of integrity,       judgment,    and
            performance.

         --The ability   to conform to the requirements  of the
            Equal Opportunity   Clause established for Government
            contractors,

         --The qualifications    and eligibility  to receive               an
            award under applicable   laws and regulations.

The Regulations      state that no contract      shall be awarded to
any person or firm unless the contracting           officer  first    has
determined that the person or firm is a responsible              prospec-
tive contractor,        The Regulations    state also that the sign-
ing of a contract       shall be deemed to be a certification         by
the contracting     officer     that he has determined that the
prospective    contractor     is responsible.

         It    is necessary,    therefore,    that a contracting      officer
obtain        up-to-date  information      on a prospective    contractor's

                                           22
organizational,       financial,     and technical   qualifications.
Information      on the adequacy of a prospective          contractor's
accounting      system and internal      controls   also should be ob-
tained,    especially     when a cost-reimbursement        contract     is to
be awarded, to ensure that the prospective              contractor      has
the ability      to submit reasonable cost estimates            and to ac-
curately    identify     and control    contract   costs that will be
billed   to OEO.

       To find out whether OEO was getting                 the up-to-date       in-
formation needed to judge a contractor's                   responsibleness,
we identified       contracts        totaling     about $8.4 million      that
were awarded in fiscal             year 1970 to 46 contractors          who pre-
viously    had not received an OEO contract                and we reviewed 34
of these contracts          that were active at the time of our work.
OEO contract      files     included no organizational,            financial,       or
other information         to show the responsibleness            of 22 of the
34 contractors        whose contracts         totaled    $4.9 million.        The
following     situation       illustrates       the problems that can re-
sult from not making the required                  preaward determination         of
a contractor's        responsibleness.

        On June 27, 1969, OEO awarded a cost-plus-fixed-fee
contract,     in the amount of $175,770, which required                 the con-
tractor    to (1) identify,       screen, and recruit         qualified    phy-
sicians for the Neig'hborhood Health Center program, (2) de-
velop a system to maximize the opportunity                  to place re-
cruited    physicians     at centers,     and (3) design plans to mo-
tivate    more physicians       to enter programs centered on the
concept of community health care.                The contract     was awarded
competitively       to a firm whose technical           proposal was judged
by OEO program evaluators          to be superior        to the nine other
proposals submitted.          Information      on the proposed contrac-
tor's    organizational      and financial       status,    however, was not
obtained by OEO's contracting            officer     prior to the June 27,
1969, contract        award.

       In a letter   dated August 14, 1969, a lawyer represent-
ing the principal      who had submitted thesuccessfulcontract
proposal to OEO informed the contracting          officer   that no
corporation    had ever existed under the name used in the con-
tract document.      The letter     identified the corporation    that
should have been designated in the contract            and stated that
it had been incorporated        on June 9, 1969, in the State of
California.      The letter   stated also that the corporation

                                          23
had not obtained its certificate     to transact business in the
State of Maryland, the State in which the firm's      principal
office  was located, until   early in August 1969, or 1 month
after the effective  date of the contract.

        As a result     of the uncertainties    regarding   the contrac-
tor's    authority    to do business and of the general confusion
surrounding       the award of the contract,      OEO's contracting
officer    terminated     the contract    on August 22, 1969, for the
convenience of the Government,            To cover contractor     costs
incurred     to August 22,    0x0  paid   the contractor   $28,550    of
the total      $175,770 estimated contract      amount.

       As part of OEOPs preaward investigation             of the respon-
sibleness     of prospective     contractors,     determinations      should
be made that contractors         have adequate systems for recording
and controlling      contract    costs.     Such determinations       are
particularly     important    for cost-reimbursement        contracts.       It
appears that these determinations             have not been made in the
past)    since  many  OEO  and   Defense    Contract   Audit Agency1 au-
dit reports     have been critical       of contractors'      accounting
systems and internal        controls.

        In one case in which OEO auditors        questioned   $4,773 of
the $13,673 costs reviewed because of inadequate accounting
records,    the audit report recommended that the contracting
officer    require the contractor     to establish     an adequate ac-
counting system and related       controls    prior to awarding any
further    contracts  to the firm.      Other audit reports ques-
tioned costs claimed by contractors          because of inadequate
supporting     documentation,   and, on occasion,       OEO auditors
recommended that contracts       be suspended until      weaknesses in
accounting     systems and related    procedures were corrected.

       Onsite evaluations     of contractors'     accounting   systems
are a means available       to OEO for determining     whether pro-
spective contractors      have adequate systems for identifying
and controlling    contract    costs.    Our review of the 169 con-
tracts   awarded by OEO during fiscal         year 1970 revealed no
evidence that preaward onsite evaluations           of contractors@


kognizant      audit   agency for     most OEO contracts.
                                                            .

                                     24
 accounting systems had been made by OEO or by the audit
 agencies acting on OEO's behalf.

          The Federal Procurement        Regulations      state that pre-
  award onsite evaluations          normally need not be performed
  when sufficient,      current contractor       organizational,     tech-
  nical,    and financial    data is available       to the contracting
  officer.     OEO, however, did not 'have suc'h data on many of
  its contractors.        To illustrate,     our review of 46 of the 94
  contracts    awarded by OEO in June 1970 revealed that no such
. data was available       on 24, or 52 percent,        of the contractors
  and that data on five additional           contractors,      which 'had
  been obtained by OEO more than 12 months prior to the con-
  tract award dates, 'had not been updated,




                                    25
                                              CHAPTER3

                    CONCLUSIONS, RECOMMENDATIONS,AND
                                                   AGENCY COMMENTS

              CONCLUSIONS

                     OEO awarded a significant         proportion       of its contracts
              during the final month of the fiscal              year.     Time constraints
              caused by June contracting         resulted     in OEOss not allowing
              prospective   contractors     sufficient      time to develop and sub-
              mit  bids, which in some cases restricted               the number of con-
              tract bidders and might have caused contractors                  to submit
              higher cost proposals than they might have submitted under
              conditions   more conducive to informed bidding.                 Year-end
              contracting   also limited     the time available           to OEO for
              evaluating   contract    proposals.

                      Other weaknesses in OEO's contract-awarding            process,
              not necessarily      associated   with the large year-end con-
              tracting     volume, were OEO's failure       to include in the ne-
              gotiation     process all responsive     bidders within the competi-
              t3xe range and OEO*s inadequate efforts             ts determine the
              responsibleness      of prospective    contractors.

              RECOMMENDATIONS
I     . I -
                   To reduce the volume of fiscal   year-end contracting    and
              to overcome the weaknesses in contract-awarding    procedures
.:-' y1 ,     and practices, we recommend that OEO:

                    --Require   program and regional offices to prepare
                       annual procurement plans that show their contract
                       needs for each fiscal  year quarter.

                    --Stagger   contract    performance periods,        whenever feas-
                       ible,  so that   contracts   for continuing        activities
                       will reach completion in months other            than June.

                    --Ensure that prospective   contractors    are allowedbsuf-
                       ficient time to develop and submit proposals and re-
                       quire adequate C&O evaluations    of all propose% sub-
                      'mitted.                                  *



                                                  26
     --Include    in the negotiation   process all contractors
         that have submitted responsive      proposals determined
         by OEO to be within    the competitive    range.

     --Make all reasonable efforts,prior             to contract    award,
        to obtain or develop, if need be through onsite
        evaluations,    current     information     needed to determine
        prospective    contractors'       responsibleness.       These de-
        terminations    should include the adequacy of the
        prospective    contractors'       accounting    systems, partic-
        ularly    for cost-reimbursement        contracts.

AGENCY COMMENTS

     OEO commented on a draft of          this report by letter    dated
August 9, 1971.    (See app. I.>         OEO stated that it recog-
nized the problems discussed in          our report and informed us
that the following   actions were        being taken to strengthen
OEO's procurement process.

     1. A directive   was issued in April 1971 providing        for
        the preparation    of quarterly research and operating
        plans with a view toward reducing the number of
        awards in the last quarter of fiscal        year 1972 to
        25 percent.     OEC expects that such early planning
        will tend to stagger contract     performance periods
        so that completion will be reached in months other
        than June.    The terms of certain     contracts   which in-
        volved continuing    types of activities     were extended,
        and thus some of the end-of-the-year        pressure was
        alleviated.

     2. As part of an effort         to improve reviews of offerors'
        proposals,      in May 1971, OEO established        a Source
        Selection     Board to evaluate proposed procurements
        over $500,000.        The Board comsists of the Deputy Di-
        rector,     a senior member of the General Counsel's Of-
        fice,     and a senior member of the program area,            The
        Board makes the final          selection   of the contractor      by
        utilizing     the findings      of the Procurement Evaluation
        Board which evaluates proposals and negotiates               with
        contractors       submitting    responsive   proposals.



                                    27
     3. Increased efforts      have been placed on including         in
        the negotiation      process all contractors      that submit
        responsive    proposals within     the competitive     range.
        During written      or oral discussions    with offerors
        that submit proposals within         the competitive    range,
        OED is placing emphasis on pointing         out any defi-
        ciencies,   omissions,     and ambiguities    in the offerors'
        proposals and on affording       them opportunities       to
        clarify,   correct,     improve, or revise their proposals.

     4. To more effectively       determine a prospective         contrac-
        tor's   responsibleness,      OEC has made a Contractor's
        Financial    Analysis form, to be executed by the
        prospective    contractor,      a mandatory requirement         in
        the request for proposals.            In addition,     greater
        emphasis is being placed on obtaining              preaward sur-
        veys of prospective        contractors.

     5. A high-level    task force has been convened to reex-
        amine and assess OEo's planning process, as well as
        the various phases associated with project       defini-
        tion,   project  management, and source solicitation
        and selection.

      We believe that OM)'s revised procedures,   if fully im-
plemented,   should correct the problems discussed in this re-
port.




                                    28
OFFICE OF ECONOkliC




   Mr. Henry Eschwege
   Associate       Director
   Civil    Division
   U. S. General         Accounting Office
   Washington,        D. C. 20548

   Dear   Mr.   Eschwege:

   Set forth       below are our views of your findings      contained       in your draft
   report    entitled     "Need for Improvements   in the Contract        Award Procedures
   and Practices        Employed  by the Office  of Economic    Opportunity",       and the
   specific     actions    which have been taken with regard       thereto.

          Year-end     contracting

          One of the principal              findings      of your report,          and one of the
          principal        reasons     for many of the problems              relating       to our
          procurement         process,      is that     the Office      of Economic         Opportunity
          awards a large          volume of contracts            in June.       We are aware of
          this    fact     and have taken remedial            measures       to overcome        it.
          During      the past fiscal           year,   we believe      that     there was a
          noticeable         decrease     in the percentage           of contract        awards in
          June.      Our contract         award statistics          for Fiscal        Year 1971
          disclose       that    33 percent        of our contracts         were awarded        during
          the month of June compared                  to 56 percent       in Fiscal        1970; and
          that    these contracts           represented      an obligated          contract     value of
          43 percent         compared     to 68 percent        in Fiscal       1970.

          One of the main reasons               for this    decrease         in contract       awards
          during     June resulted         from my issuance         of a directive           to all
          program      activities       which established          April       1st as the cut-off
          date for submission            of Procurement         Requests        to the Procurement
          Division.         (Exhibit     A).      This directive,          unlike    similar
          requests      in previous        years,     was strictly         adhered     to, and enabled
          procurement         personnel      to eonduct     their    procedures          in a more
          professional          manner.      Moreover,     certain       training      and   technical
          assistance        contracts,       which represented           a continuing        need of the
          Agency,      were extended         by their    terms thus alleviating                some end
          of the year pressure.




                                                    29
APPEHDIX I

  Although       I believe        we have made significant                improvements         this
  past fiscal           year in reducing          the volume of fiscal              year-end
  contracting,            I have instructed           our    Controller        to prepare
  quarterly          research     and operating          plans with a view towards
  reducing       the number of awards in the last                      quarter      of Fiscal
  1972 to twenty-five               percent.        To the extent         that our
  legislative           process     permits      adequate     time for planning,             I
  intend      to fully        enforce      this   goal.      Such early        planning      will
  also tend to stagger                contract      performance        periods      so that com-
  pletion       will     be reached        other    than in the month of June.

  Submission         of   contractors'          proposals




                                         [See GAO note                1, p.       33.1

 We are mindful     of our obligation             to permit      offerors      a reasonable
 time to prepare      proposals,        as stated        in the Federal        Procurement
 Regulations.      Our review        of our 1971 procurements              indicates      that
 the "minimum    bidding       time"    referred       to in your report           of 30 days
 was observed.      Indeed,       in certain        procurements        of a complex nature,
 we are allowing      offerors       sixty     (60) days to submit           their    proposals.

  Evaluation         of   contractors'          proposals

  The evaluation             of contractors'           proposals        by this Agency in previous
  fiscal       years was another              area covered         by your report.               We recognize
  that      the findings          you made in this            area are a direct             result         of the
  emphasis        on the June award of contracts.                         In our comments set forth
  above, we have described                    the measures          that we have taken to remedy
  the June procurement                 problem.         However,       we would like           to describe
  some of the steps we have taken to improve                                our technical            review       of
  offeror's         proposals.           In April,       1970, I issued            eleven      instructions
  dealing       with      the administration             of grants        and contracts            in Headquarters
   (Exhibit       B).       Several      of these instructions                detailed      procedures            for
  review       of technical          proposals.          It has been our experience                      that     these
  review       procedures         have been very comprehensive                     and our contract               files
  now contain           detailed       technical        evaluations         of all offeror's               proposals.
  In addition,            the project         personnel       participate          in our contract
  negotiations           and after         the oral discussions               are concluded            they
  re-evaluate           and make final           ratings      on the offeror's             proposals.             We
  believe,        therefore,         that we are now allowing                   sufficient         time to
  evaluate        our proposals.              In support        of this       it is noteworthy               that
  an average          of two weeks was expended                   by our regional            staffs        in the
  technical         evaluation         process       compared       to the instance            cited       in your
  report       of one of the regional                 evaluation        panels       having      "spent        only
  two and onekalf              hours evaluating            the proposals".



                                                         30
                                                                                      APPENDIX I


In addition,         for procurements              over $500,000,          I have established
a Source Selection             Board.        This Board consists              of the Deputy
Director,        a senior      member of the General                Counsel's        Office     and a
senior     member of the program                area.       This procedure           involves
setting      up a Procurement            Evaluation         Board,     composed of usually
five     senior    personnel        of the Agency,            together      with representatives
of the Procurement             Division        and the Office          of General          Counsel.
The Procurement           Evaluation         Board makes a detailed                evaluation         of
the Request        for Proposal          prior      to its issuance           both as to the con-
tent of the Statement               of Work and the Evaluation                   criteria.          The
Procurement        Evaluation         Board then evaluates               the proposals          when
they are received.                These findings           consist     of a list         of all
offerors        who are within          a competitive           range,     capability,         price,
and all other          factors       considered.           The Procurement           Evaluation
Board, with        the representative               of the Procurement             Division       who
 is a Board member, conducts                   oral     discussions        with those offerors
in the competitive             range.        After      such discussions,            the proposals
are re-evaluated            and finally         ranked.         The Procurement            Evaluation
Board then submits              its findings          to the Source Selection                Board.

The Source Selection       Board after       it is briefed       by the Chairman
of the Procurement      Evaluation       Board and the representative                of
the Procurement    Division,       then advises        the Procurement        Division
of its selection.       This procedure         results      in a detailed      analysis
of every step in the procurement             process      by the Deputy Director
of the Agency,    and many of its senior              personnel.      Indeed,      this
procedure   has proven     so effective        that we are considering             using
it on all our procurements           over $300,000.

Contract      negotiating         practices




                 [See GAO note                1,    p.   33.1




                                                   31
APPENDIX I




                   [See GAO note       1, p. 33.1




During Fiscal Year 1971 we put increased efforts on including            in
the negotiation    process all contractors       who submitted responsive
proposals within the competitive         range. We submit that our record
of having negotiated with an average of 4.7 contractors           during
the fiscal year is a marked improvement over the averages indicated
for the previous fiscal      years covered by your report.      In addition,
during the conduct of written or oral discussions with offerors
who submitted proposalswithin        the competitive   range, we are placing
much emphasis in pointing out to the offeror deficiencies,            omissions,
and ambiguities    in his proposal and to provide him with an opportunity
to clarify,   correct,   improve or revise this proposal.        In this
regard, we are mindful that practices which amount to auctioning
techniques are strictly      prohibited;     and the manner in which
discussions are actually conducted must avoid the possibility            of
undesirable technical     transfusion.

Determining   contractors'   responsibleness

Your report further indicated that the Office of Economic Opportunity
has not adequately determined prospective contractor's           responsibility
as required by the Federal Procurement Regulations.            In order to more
effectively  determine a prospective contractor's         responsibility,     we
have incorporated OEOForm 193 "Contractor's          Financial   Analysis"
(Exhibit C), as part of the RFP, and the offeror's           completion of
this form is a mandatory requirement of the RFP. This form pro-
vides the Contracting Officer with a data base in which to assess
theqinancial    capabilities    of the offeror,   prior to the time of
proposal evaluation.       In addition, during the past fiscal        year,
personnel from the Procurement Division,        together with cognizant
program personnel, performed, in several instances, on-site surveys




                                        32
                                                                                                        APPENDIX T

           before      contracts       were awarded.            These visits          were made to
           determine        prospective         contractor's          technical       qualifications,
           as well as to review               their     organizational           and financial
           capability.           We have also placed               greater      emphasis       on obtaining
           pre-award       surveyson        prospective          contractors.           To achieve         this
           objective,         the    Procurement        Division        has   established         a   close
           liaison      with      the Audit      Division        in obtaining         contractor's           cost
           information.             For your information              we are enclosing             as
           Exhibit      D, an example of financial                    and cost information               furnished
           to the Procurement             Division       by a regional           auditor       subsequent         to
           his receipt          of the "'Request          for Audit        Services"       form.       Further-
           more, during           the coming year we will                give special          attention        to
           conducting         on-site      evaluations         of contractor          performance.

   We trust      that    the response         set forth         herein     demonstrate        some of the
   positive      measures      we have undertaken               to improve       and strengthen           our
   acquisition        process.        We believe        that we have achieved                a high degree      of
   professionalism           in this    vital      area.        Notwithstanding           our achievements,
   however,      the acquisition          process       demands constant            monitorship        and it is
   with this       in mind,      that   I have recently              convened     a high level          task force
   to re-examine         and assess our planning                  process,      as well      as the various
   phases associated            with project         definition,         project     management,          and source
   solicitation        and selection.            In particular,            I want programs          structured
   and resources         allocated      in such a manner so as to insure                       that     actual
   achievement        of program       objectives         is the primary          result.

    Sincerely,


&4$+~gf&s..x,.~                                           /
                  .
    De uty            rector

    Enclosures



    GAO note:
        1. The deleted material                            pertained to matters contained
            in the draft report                           which were not included in this
            report,

             2. The exhibits     enclosed with the Deputy Director's
                letter  have been considered     in the preparation  of
                our final    report but have not been included here.




                                                              33
APPENDIX II


                 PRINCIPAL OFFICIALS OF THE

               OFFICE OF ECONOMIC OPPORTUNITY

                 RESPONSIBLE FOR ACTIVITIES

                   DISCUSSED IN THIS REPORT


                                                    Tenure of office
                                                    From            -To
DIRECTOR:
    Phillip  V. Sanchez                      Sept.     1971     Present
    Frank C, Carlucci                        Dee,      1970     Sept, 1971
    Donald Rumsfeld                          =Y        1969     Dec. 1970
    Bertrand M. Harding     (acting)         Mar.      1968     fiY     1969
DEPUTY DIRECTOR:
   Wesley L. Hjornevik                        Oct.     1969     Present
   Robert Perrin (acting)                     Mar.     1968     Oct.    1969

ASSISTANT-ASSOCIATE DIRECTOR
  FOR ADMINISTRATION (note a>:
    Ernest Russell  (acting)                  Apr.     1971     Present
    Robert C. Cassidy                         Sept.    1967     Apr.    1971

DIRECTOR, PROCUREMENTDIVISION:
    Ralph A. Howard                           Sept.    1969     Present
    John A, Donohue                           Aug.     1967     Sept. 1969

"The Office of Administration          was called     the Office       of Man-
 agement until June 1968.




                                                              US.   GAO,   Wash.,   D.C.


                                  34
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