DOCUMENT RESUME 03581 - [A2513635] Social Security Administration Procurement Procedures with Regard to a Multiple Award Contract and its Maximum Order Limitation. HRD-77-144; B-164031(4). August 31, 1977. 6 pp. Report to Rep. J. Kenneth Robinson; by Gregory J. Ahart, i.rector, Human Resources Div. Issue Area: .deral Procurement of Goods and Services: Reasonableness of Prices Under Negotiated Contracts and Subcontracts (1904). Contoct' Human Resources Div. Budget Function: General Government: General Property and Records Management (804). Organization Concerned: General Services Administration; Social Security Administration. Congressional Relevance: Rep. J. Kenneth Robinson. Authority: 41 C.F.R. 101-26, 401(a). Concerns were expressed about Social Security Administration (SSA) practices in the procurement of standard forms. An examination was conducted to determine whether regulations were being circumvented and whether the concept of Maximum Order Limitation (MOL) was being properly used. MOL allows Federal agencies to purchase supply items under contract up to a specific dollar amount after which competitive Lids would have to te submitted through the General Setvices Administration (GSA). Findings/Conclusions: The complainant alleged that he was called by an SSA employee who requested pricing information on two items, including ,50,000 sheets of form 1292. He provided this information and believed taat his company had the lowest price for form 1292. He was told that this item would not be procured through competitive bids because of time limitations, although the price was over the MOL. Subsequently, 284,375 sheets of this item were purchased from a competing vendcr after it had reduced its prices. When the complainant inquired about orders on form 1292, he was told that there would be no orders and that the pricirg request was for information only. The Associate Commissioner of SSA stated that his procurement people did not solicit bids to compare prices, a practice fortidden by regulations. Since this point could not he proven and steps were being taken to improve procurement procedures, further pursuance of the matter was not warranted. There is nothing in the regulations to prevent the agency from reducing quantities to fall within the MOL. (HTW) 5S/iz .~ u~L ?UNITED STATES GENERAL ACCOUNTING OFFICE WASHINCTON, D.C. 20548 August 31, 1977 HUMAN "CSOURCICS DIVISION B-164031(4) The Honorable J. Kenaeth Robinsun 4=0 House of Representatives Dear Mr. robinson: several In your letter of January 24, 1977, which transmitted a Social Security documents from one of your constituents regarding products, you expressed concerm that procure- procurement of pape: cha: the concept of ment regula.ions may have been circumvented and used. In your the Maximum Order Limitation was not being properly that 4e examine letters of March 14 and May 6, 1977, you requested the General Services the possibilities of having vendors not.fy in their Federal Adir.nistratio.. more quickly when they nak. a change showng what icems Supply Scheduie prices, having a central opace for a time have beer. purchased by Federal agencies, and providing delav before making a price change effective. Procuremenat As agreed with your office on June 3, 1977, vur respond to your and Systems Acquisition Division will study and requests of March 14 and May 6, 1977. This letter is .n response to your letter of January 24, 1977. form We examined the subject procurement of Social Security 25, standard item) made on September 1292 (a Federal Supplv Schedule suDplied. inf.rmatior -;ha: vour cnr1stivuernt 1976. We a'sc reviewed the conr ude tiat Social As discussed below, based on our work we ca=not or that the Security purposeiv circumvented procuremen: regulations not properly used in this concept of the Maximum Order Limitation was procurement. documents and According to information derived fro_ the above Security and General discussions with procurement personnel irn Social occurred. Services Administration, the following events EiRD-77-144 You r constituent stated that he was called on the telephone by an employer of Social Security's procurement section on September 16, 1976, and that that empioyee requested pricing information or; t-o Federal Supply Schedule items: 50,000 sheets of Social SecJrity form 1291 and 450,000 sheets of Social Security form 1292. He said that on that date, he believed that his com- pany had the lowest price on the Federal Supply Schedule for form 1292--$180.00 per 1,000 sheets fox orders of 10,000 sheets or more, before discount. He said that he provided the information requested by Social Security. Your constituent said that he talked to this Social Security employee again cn September .7, and was told to submit a written quotation for the 50,000 sheets of form. 129. but not for the 450,000 sheets of form 1292. 'ie stated that when he told the employee that the price for +50i000 sheets was over the Maximum Order Limitation and asked if Social Security was going to have the General Services Ad.i eira tion ask for :omnptitive bids, he was told no, because there would not be enough time to get bids before September 30, 1?76, (the end of the fiscal year). He said that he was told that the pricin. infor_,.ation on the form 12292 was for inform.ation only for the various departments to uise in reviewing their needs. The Maximum Order Limitation allows Federal agencies to purchase suppily item.s under contract up to a specific dollar amount: an amount above that specified limit would have to go through the General Senrices Administrat_.n for'competitive bids to try to get a lower price for the G,.;er-ment. Ideally, the Maxim-u Order Limitation provides a cut-off point where it is cost effective to have the agency use Federai Supply Schedules for oroe :nr, rauner than process its eorce througn the General Services Adm-irnistraticn. Your constituent said that he subm.itted a written price cuotation for for-.. 1291: Social Securitv issued a purchase order to his company on SeptemDer 27, 1974, for 50,000 sheets. -2- 1976, to the General Services By letter dated September 27, form vendor reduced its price for Administration, a competing 1C,000 sheets or more 1292 from $212.75 per 1,OCO for orders or tc 99,999, and $171.25 for orders of 10,000 to $212.75 per 1,000 sheets or more, before discount, per 1,000 for orders of 100,000 On September 25, 1976, Social effective September 25, 1976. of its form 1292 from this Security purchased 284,375 sheets plus printing and less a discount vendor at $171.25 per 1,000 of $39,995.17. of 22 percent for a total price October 6, 1976, he again Your constituent said that on emplovee he had been called the Social Security procurement of the departmerts had decided dealing with and asked if any going to order, and if there hcw much of for-:, 1292 they were He said that for large orders. were going to be any requests and that the pricing be no orders, he was told that there would only. request was for informaticn c.lled Social Security again Your constituent said that he be if any fovra: quotations would Co. November 15, !- S- to see inouired .orzer that Social Security had coming or that large there would about in Setermber. He said that he was told no, of the recuests for pricin; be no orders placed as a result of for. 12'1 that went ro his except the one for =n.000 sheets marufacturers were called to get company; he was toLc .. a;z all prices for informsation only. Social Security emplovee did It is apparently true that a as a requestin- prices, and that call vour constituent's company an order fcr 50,000 sheets of form. 121 was result of this cal', Your consti=uent han stated that the placed with his com-anv. were called to al manufacturers Social Secu.ity em-loyee said got tne Set prices. We assume :nat the competing vendor who 5 3 5 sheets--was one of the manufacturers called. large order--2L , competing vendor offered a price We must also assume that the on September 2-, l976, (effective reduction to the Government the lowest price on the Federal back to September 25) to offer receive- the order for 2.4,375 Supply Schedule and as a result, sheets of form 1292. -3- By letter dated December 8, 1976, you requested that the Co~.issioner of Social Security provide you vitn backSround information on the procedures they used to procure approximately 450,000 sheets of form 1292 in September 1976. By letter dated January 10, 1977, the Associate Commissioner for Management and Administration answered your inquirv and stated that "the quantity awarded was reduced from 430,C', sheets to 254,275 /sic/ sheets prior to award, at the request of the ordering office, due to a change in their requirements." Our revie, of the inventory records at Social Security showed that as of July I, 1l76, the Stock Reolenishment Card for form- 1292 had been adjusted to show "quancity to be ordered" of 1,,30 ^ases or 450,000 sheets. The actual order was reduced to 25-,375 sheets. However, there was no indication in t. records showing why the armount to be ordered was reduced. Your constituert, in his letter of December 23, 1976, raisCe -he ifsue concernin- the correct Maximum Orde; Limita- tior. for this par:icuia: ;ie-e;aon the Supp ,n.edule. Under the multiple award contracts the Maximum Order Limitation ies" was "suS 'a: the time of this order, S>C,000, while for the Maximum Order Limitatio- for ~'cards'--a special ca:egory of sucopplies--was $&0,0CC. The $3S,996.1 purchase on September 25, 197,, was for "cards." We attempted :o determine whether form... 1292 should have been classified as "supplies" or "cards" and found that there was much confusion on both General Services and Social Security Ad.ministrat.ons' part as to whether the Maximum Order Limitation shculd have been $2bC,000 or $S0,Cu00. We could not etr a satis- fact def ii--tioznfor "sp: 'e-' vs. "cards" fro- eith:er the General Services or Social Securitv Acd:inr.strations, to determine in wnich ca..-or. this item shnuid be. However, according to the General Ser-ices Ad-.nistration, there was so much confusion on this point that for the Federal Supply Schedule contract period from October 1, 1976. to September 30, !977, the Maxi;:um Order Limitalior was cnanged to S40,00C for "'supplies," without discri-inating for the special category of supplies--" irds." -4- We presented the events surrounding this procurement to Social Security's Associate Conmmissioner for Management and Administration and, in view of the fact that telephone calls were made to Federal Supply Schedule vendors, we also pointed out that 'the Code of Federal Regulations (41 CFR 101-26, 4 01(a)) states in part, "* * * Agencies shall not solici: bids, proposals, quotations, or otherwise test the market solely for the purpose of seeking alternative sources to Federal Supply Schedules. Furtherz, agencies shall not request formal or informal qLotations from Federal Supply Schedule contractors for purposes of contract price comparisons." Because of this regulation and the telephone calls made to Federal Supply Schedule vendors, we asked the Associate Commis- sioner what explanation the Social Security Admin:.stration had to offer. The Associate Comrmissioner stated that he was deeply concerned about the issues we raised and admitted there was some looseness in the prozur-enr: procedures fcll'wed. Base4 on .is review he concluded that there had been some misunderstandinzg but there was no violation of law or regusa:ion. He c'atec rtiat the procurement people did no; solicit bids or onrber informatio. for the purpose of seeking to compare prices. They were seeking to clarify pro- duct identification termrino'ogv and to get up-to-date price verification of established prices. He pointed out that recent steps have bee; taken to improve procurement procedures, such as --the Division of Contracting and Procurement, under a reorganization, was pilaced a- a hig-her ivel in the Social Security Administration, has a la ger staff: and is azgressiveiy strengthening supervision and training at all levels, and that --explicit orders were given to improve both the procedures and documentation for future purchases. - 5 - Considering that the Associate Commnissioner stated that his procurement people did not solicit bids to compare prices, the questior. of whether they did or did not would be most difficult, if no: imoossible, to prove. In view of this and the statement that Social Security intends to improve procedures for future purchases, we do not believe that further pursuance of this matter is warranted. In regard to the Maxinum Order Limitation, we could not, under exlsting regulations, find anything to prevent an agency from reducing the quantity to be ordered to a quantity which would fall within the Maximum Order Limitation. As arranged with your office, we are sending copies of this letter to the Co-.issiov.er, Social Securit. Administration, and the Administ-azCr. General Se.-'ices Administration. Copies will also be available to other interested parries who request them. We trus- this letter is responsive to your needs. Sincerely yours, Cregor . W-Lart Direct ' - 6-
Social Security Administration Procurement Procedures with Regard to a Multiple Award Contract and its Maximum Order Limitation
Published by the Government Accountability Office on 1977-08-31.
Below is a raw (and likely hideous) rendition of the original report. (PDF)