oversight

HUD EEO Investigation: Contracting and Process Irregularities in HUD's Investigation of the IG

Published by the Government Accountability Office on 1999-09-08.

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

                 United States General Accounting Office

GAO              Report to the Chairman, Committee on
                 Governmental Affairs, U.S. Senate



September 1999
                 HUD EEO
                 INVESTIGATION

                 Contracting and
                 Process Irregularities
                 in HUD’s Investigation
                 of the IG




GAO/OSI-99-6
United States General Accounting Office                                                 Office of Special Investigations
Washington, D.C. 20548



                                    B-282123                                                                                     Leter




                                    September 8, 1999

                                    The Honorable Fred Thompson
                                    Chairman, Committee on Governmental Affairs
                                    United States Senate

                                    Dear Mr. Chairman:

                                    In February 1998, the Deputy Assistant Inspector General (IG) for
                                    Investigation for the U.S. Department of Housing and Urban Development
                                    (HUD) filed an Equal Employment Opportunity (EEO) complaint with
                                    HUD's Office of Departmental EEO. The complaint alleged that HUD's IG,
                                    Susan Gaffney, had discriminated against him because of his race. On
                                    December 14, 1998, you requested that we assist the Committee in
                                    reviewing matters concerning that EEO complaint. Specifically, you asked
                                    that we determine (1) whether HUD had awarded contracts concerning the
                                    EEO complaint to outside firms in accordance with applicable government
                                    standards and (2) whether HUD's actions were justified when it deviated
                                    from its standard EEO process by contracting with firms not on the
                                    General Services Administration's (GSA) schedule of contractors.1



Results in Brief                    HUD's awarding of contracts to two law firms to investigate the Deputy
                                    Assistant IG's EEO complaint deviated from HUD's standard EEO
                                    investigation process and did not comply with the requirements of the
                                    Federal Acquisition Regulation (FAR). From February 12, 1998, to
                                    August 5, 1998, HUD followed its standard EEO process of reviewing the
                                    complainant's allegations for acceptance, contracting with a GSA-schedule
                                    firm to investigate the accepted allegations, and conducting the
                                    investigation. On August 5, 1998, however, HUD officials put the
                                    investigation on hold. On that same day, HUD deviated from its normal
                                    EEO process and requested proposals from a limited number of non-GSA-


                                    1
                                     GSA directs and manages the Federal Supply Schedule program, which provides federal
                                    agencies with a simplified process for obtaining commonly used commercial supplies and
                                    services at prices associated with volume buying. GSA issues Federal Supply Schedules
                                    containing information necessary for ordering. Ordering offices then place delivery orders
                                    directly with schedule contractors for the supplies and services they require. (48 C.F.R.
                                    § 8.401)




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schedule firms to conduct this same investigation. HUD violated the FAR
when it failed to synopsize this requirement in the Commerce Business
Daily (CBD) and inappropriately limited the competition to seven firms.
HUD awarded contracts to two law firms on August 26, 1998. Its last-
minute amendment to the Request for Quotations (RFQ) to accommodate a
joint proposal from the two firms and other actions by HUD officials
contributed to an appearance that HUD manipulated the procurement
process in order to direct the contract awards to the two firms. Although
the usual cost for any type of EEO investigation at HUD is approximately
$3,000, these contracts totaled about $100,000.

The significant role played in this procurement by Harold Glaser, then
Deputy General Counsel for Programs and Regulations, was also
extraordinary. Mr. Glaser took the lead in suspending the GSA-schedule
firm's investigation and contracting with the non-GSA-schedule firms. His
actions included compiling the list of potential contractors, contacting the
Deputy Assistant IG's counsel to request an extension of time to complete
the investigation, evaluating the proposals, reviewing the investigative
plan, and consulting with the firms during the investigation.

HUD officials told us that they deviated from the standard EEO process for
a number of reasons, including their perception of an environment of
pervasive racial discrimination in the Office of the Inspector General (OIG)
and the high rank and unique positions of both the Deputy Assistant IG and
IG Gaffney. The justifications HUD provided for deviating from its usual
EEO process were largely subjective and therefore difficult to assess.
However, information we found substantially contradicts several factors
cited as justifications for HUD's deviation.

Certain HUD officials served to impede our investigation. Specifically, HUD
insisted on having an outside attorney present as “agency counsel” during
interviews of HUD employees and prevented us from interviewing several
HUD employees who may have possessed information critical to our
investigation. While we would have preferred to have access to these
individuals, we were able to gather sufficient information by employing
other procedures.




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Introduction

HUD's Standard EEO          Both Sandra Chavis, Director of HUD's Office of Departmental EEO, and
Process                     Sandra Hobson, Director of HUD's EEO Division (within the Office of
                            Departmental EEO), explained to us the steps that are involved in handling
                            any EEO complaint. According to the two directors, the first step in HUD's
                            EEO process is the filing of an informal complaint by an employee. One or
                            more EEO counselors are then assigned to the case in this initial stage.
                            Their job includes advising the complainant concerning the EEO process,
                            reviewing each of the allegations in the complaint, and attempting to
                            resolve them. If any allegation in an informal complaint cannot be resolved
                            at this stage, the complainant may file a formal complaint.2

                            If a formal complaint is filed, it is reviewed within the Office of
                            Departmental EEO, which informs the complainant of the allegations it has
                            accepted for investigation. The next step, according to Ms. Chavis, is to
                            contract with an appropriate firm on the GSA schedule for an investigation.
                            The investigation must be completed within 180 days of the formal
                            complaint filing date unless the complainant agrees to an additional
                            90 days. After the investigation, Ms. Chavis, as Director of the Office of
                            Departmental EEO, renders a final agency decision concerning the case,
                            which may be appealed to the Equal Employment Opportunity Commission
                            (EEOC) or a district court. A complainant may file a civil action in a district
                            court if HUD has not issued a final agency decision after 180 days from the
                            time that the formal complaint was filed.


Chronology of Subject       On November 12, 1995, IG Gaffney appointed an African-American male as
Complaint and Contracting   the OIG's Deputy Assistant IG for Investigation. The Deputy Assistant IG
                            subsequently applied and was not accepted for the position of Assistant IG
Events
                            for Investigation. On December 9, 1997, the IG selected a white male, who
                            had served as Associate Counsel to the IG, for the position. That same day
                            the Deputy Assistant IG learned that he would not receive a Senior
                            Executive performance-based bonus.




                            2
                             According to Ms. Chavis, only the allegations that the counselors have received, reviewed,
                            and attempted to resolve become part of the formal investigation.




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On January 14, 1998, the Deputy Assistant IG filed an informal complaint,
alleging that he was discriminated against because of his race when he was
not selected for the position of Assistant IG for Investigation, when he was
not awarded a Senior Executive performance-based bonus, and when
management treated him disparately in work assignments. The complaint
further alleged that these actions were part of a pattern and practice of
discrimination in the OIG involving many aspects of employment. On
February 12, 1998, after attempts to resolve the informal complaint through
counseling had failed, the Deputy Assistant IG filed a formal complaint. On
May 15, 1998, Ms. Hobson accepted the first two allegations in the
complaint for investigation but rejected the third because the Deputy
Assistant IG had declined to complete the counseling process for this
allegation.3

Following its standard process, on May 26, 1998, HUD contracted for a
formal investigation of the two accepted allegations with a GSA-schedule
investigative firm, Counter Technology Inc. (CTI), for $2,700. HUD's usual
cost for any EEO investigation is approximately $3,000. Ms. Chavis and
Ms. Hobson told us that because they had believed this to be a high-profile
case, they contracted with CTI, a firm that had a record of providing HUD
with high-quality investigative reports. Additionally, Ms. Hobson insisted
that CTI assign its best investigator. CTI began its investigation by June 11,
1998, and proceeded, with an approved investigative plan, to schedule and
conduct interviews of pertinent individuals. CTI fully expected to complete
the investigation by August 11, 1998, HUD's 180-day deadline for issuing a
final agency decision.

However, in the middle of July 1998, the General Counsel asked Howard
Glaser, then HUD's Deputy General Counsel for Programs and Regulations
and now Counsel to the Secretary, to review a request from IG Gaffney for
legal representation in the EEO investigation. Mr. Glaser told us that in
responding to the IG's request he had asked Ms. Chavis and Ms. Hobson
about the status of the investigation. According to Mr. Glaser, they told him
that no investigator had been assigned and no investigation was underway.
Mr. Glaser stated that he became very concerned because at this time the
180-day deadline for completing the investigation was only 10 or 20 days



3
 On Sept. 25, 1998, Ms. Chavis informed the Deputy Assistant IG's attorney that HUD had
reversed its earlier decision and accepted all of the complainant's allegations for
investigation.




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away. Mr. Glaser told us that he had reported this information to HUD's
Deputy Secretary, Saul N. Ramirez, Jr.

After Mr. Glaser contacted Deputy Secretary Ramirez to discuss the
complaint, Mr. Ramirez asked Ms. Hobson about the status of the case.4
According to Deputy Secretary Ramirez, she told him that no investigation
was underway. Deputy Secretary Ramirez told us that he called a meeting
with Mr. Glaser, Ms. Hobson, and Ms. Chavis.5 He recalled that the meeting
had focused on the high level of the officials involved and the timeliness of
the EEO process, among other matters. At this meeting, Deputy Secretary
Ramirez decided to deviate from the normal process and hire a non-GSA-
schedule firm to investigate the complaint. According to Mr. Ramirez,
Mr. Glaser recommended the decision, Ms. Chavis concurred with the
decision, and Ms. Hobson disagreed.

We were unable to determine whether Mr. Glaser or Deputy Secretary
Ramirez knew that CTI was already investigating the complaint when they
decided to hire a non-GSA-schedule firm. They told us that Ms. Chavis
and/or Ms. Hobson had informed them that no investigation was underway
when they first inquired about the status of the EEO case, even though this
information was incorrect. Moreover, both officials said Ms. Chavis and
Ms. Hobson were in the meeting in which the decision was made to hire a
non-GSA-schedule firm; and yet, here again, they did not learn that an
investigation was underway. Instead, Mr. Glaser told us that he learned
sometime after the non-GSA-schedule firms had begun their investigation
that a CTI investigator had been assigned to the case and that he
immediately directed the EEO office to suspend CTI's contract. Deputy
Secretary Ramirez, on the other hand, told us that it was later on the day
that the meeting was held with Mr. Glaser, Ms. Hobson, and Ms. Chavis that
Ms. Hobson told him for the first time that HUD had contracted with a GSA-
schedule contractor a few days earlier but that HUD had already
terminated the contract. The CTI investigation, however, was put on hold
on August 5, 1998—after the meeting at which the hiring of a non-GSA-



4
 Deputy Secretary Ramirez told us that he first became aware of the Deputy Assistant IG's
complaint in the summer of 1998 when he received a copy of the complaint in the normal
course of business. His next involvement occurred when he was contacted by Mr. Glaser.
5
 We asked Deputy Secretary Ramirez to check his calendar to ascertain the exact date of the
meeting, but he was unable to find the meeting scheduled on his calendar. He was able to
tell us only that the meeting had occurred in the summer of 1998.




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schedule firm was decided upon and well before those firms began their
investigation. The CTI contract was thereafter terminated.

When we attempted to determine what Ms. Hobson and Ms. Chavis had
told Deputy Secretary Ramirez and Mr. Glaser about the status of the
investigation, HUD officials refused to allow us to reinterview Ms. Hobson
and Ms. Chavis. Mr. Glaser told us, however, that it made no difference
when he learned of the CTI investigation because HUD officials had
decided that they wanted to contract with a more credible outside
investigator.

Once the decision was made to procure the services of a non-GSA-schedule
contractor, Mr. Glaser became deeply involved in the reprocurement of the
investigative services. Mr. Glaser told us that he wanted to issue a sole-
source contract to Deval Patrick or someone of similar stature. Mr. Patrick,
a partner with the firm Day, Berry & Howard, LLP, had previously served as
an Assistant Attorney General in the U.S. Department of Justice's Civil
Rights Division and had gained national recognition as chairman of Texaco
Inc.'s Equality and Fairness Task Force, formed as part of the 1996
settlement of a race discrimination suit brought by Texaco's African-
American employees. However, on the advice of HUD procurement
personnel, Mr. Glaser decided to conduct a limited competition.

To do this, Mr. Glaser contacted the Deputy Assistant IG's lead attorney
sometime before August 11, 1998, the original deadline of the EEO
complaint investigation, and asked if he would agree to a 90-day extension
to complete the EEO investigation. During the conversation, Mr. Glaser
stated that HUD was contracting with Mr. Patrick to conduct the
investigation. The lead attorney agreed verbally to the extension.6
Mr. Glaser also wrote a Statement of Work (SOW), tailored after the
standard GSA-schedule EEO investigation SOW, specifically adding a
requirement that an attorney conduct the investigation. Mr. Glaser then
contacted Kumiki Gibson, an attorney with Williams & Connolly who had
worked as a trial attorney in the Justice Department's Civil Rights Division
and as Counsel to Vice President Albert Gore, Jr., and asked her to provide
a list of potential contractors. Mr. Glaser developed a source list based on
this conversation. Despite the fact that the SOW called for an attorney to
conduct the investigation, the final list of seven sources included only two


6
 On Aug. 12, 1998, the complainant's lead attorney agreed in writing to an Aug. 11, 1998,
formal request from HUD's EEO Division for a time extension to complete the investigation.




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law firms, Mr. Patrick's and Ms. Gibson's. The other sources on the list
were investigative and accounting firms. Mr. Glaser provided the list to
HUD procurement personnel to prepare an RFQ7 to each firm, which was
issued on August 5, 1998. It required all proposals to be submitted by
August 11, 1998.

HUD received a proposal from Decision Strategies/Fairfax International on
August 10, 1998, and Day, Berry & Howard, LLP on August 11, 1998. Day,
Berry & Howard, LLP's proposal was expressly contingent upon the award
of a separate contract to Ms. Gibson and Williams & Connolly. Because the
RFQ called for only one contractor, that same day the HUD Contracting
Officer signed an amendment,8 allowing HUD to award separate contracts
for portions of the SOW and extending the time for receipt of proposals to
August 12, 1998. HUD received Williams & Connolly's proposal on
August 12, 1998. Although the proposals of Williams & Connolly and Day,
Berry & Howard, LLP were conditioned upon dividing the tasks in the SOW
between the two firms, neither proposal described how the tasks were to
be divided. By a letter dated August 20, 1998, 8 days after the extended time
for receipt of proposals, Ms. Gibson informed HUD that Williams &
Connolly would focus on specific incidents or acts of alleged
discriminatory conduct and Day, Berry & Howard, LLP would focus on
alleged systematic problems, such as discriminatory practices. Mr. Glaser
and two other HUD officials evaluated the three proposals and
recommended awarding separate contracts to Williams & Connolly and
Day, Berry & Howard, LLP.

On August 26, 1998, HUD awarded purchase orders to Williams & Connolly
in the amount of $49,875 and to Day, Berry & Howard, LLP in the amount of
$48,000. Mr. Glaser told us that he reviewed the investigative plan and
spoke with the investigators concerning various issues during the
investigation. Despite his deep involvement in the formation and
administration of these contracts, Mr. Glaser denied being the Government
Technical Representative (GTR) and referred to his role as such as a myth.
After IG Gaffney testified before your Committee concerning Mr. Glaser's
involvement in the EEO process, Mr. Glaser instructed that the contract be




7
 Although HUD identified the solicitation as a Request for Quotations, HUD and the offerors
referred to their responses as proposals.
8
Although the amendment was signed on Aug. 11, 1998, its effective date was Aug. 10.




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modified to remove his name as the GTR and to substitute Ms. Chavis's
name in that role.

Upon learning of the contracts with outside law firms for the EEO
investigation, IG Gaffney sent two letters to the EEOC—dated
September 1, 1998, and September 2, 1998—requesting that EEOC assume
responsibility for the subject EEO complaint. As the basis for her request,
the IG accused senior HUD management of misconduct in hiring outside
firms to investigate the EEO complaint and in creating an environment in
which she was unable to obtain a fair investigation regarding that
complaint. EEOC denied this request on September 11, 1998. IG Gaffney
renewed her request on September 15, 1998. On October 28, 1998, HUD
contracted with Donald Bucklin of Squire, Sanders & Dempsey, in the
amount of $100,000, to assist HUD in defending against the Deputy
Assistant IG's EEO complaint. Among other tasks, Mr. Bucklin was to
prepare a report defending HUD's handling of the EEO investigation. On
November 10, 1998, the EEOC again denied IG Gaffney's request that
EEOC assume responsibility for the EEO investigation. On December 23,
1998, Mr. Bucklin issued his report, which concluded that HUD's
contracting procedures for the outside investigators were appropriate and
consistent with federal acquisition law and regulations.9

On December 29, 1998, Deputy Secretary Ramirez referred the subject EEO
case to EEOC for final decision. As impetus, the referral letter cited what
HUD considered to be inappropriate intervention in that agency's decision-
making process by a HUD OIG audit of the EEO complaint process and by
our investigation. On January 29, 1999, EEOC declined the referral, stating
that despite HUD's request, EEOC does not draft final agency decisions
because it is an appellate body concerning such decisions.

On April 20, 1999, based on HUD's failure to issue a final agency decision,
the Deputy Assistant IG filed suit in the District Court for the District of
Columbia. The Deputy Assistant IG alleged in his complaint that the EEO
investigation had been completed in December 1998. On June 28, 1999, a
HUD official confirmed that the investigation was complete but told us that



9
 In reviewing HUD's contracting procedures relative to the Deputy Assistant IG's EEO
complaint, we reviewed Mr. Bucklin's report. We found that the report contained factual
errors and incorrect legal citations. See HUD: Review of Bucklin Report Prepared to Assist
HUD in Defending Against EEO Complaint by HUD's Deputy Assistant Inspector General
(GAO/OSI-99-16R, Aug. 3, 1999).




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                        because HUD is no longer required to issue a final agency decision, the
                        report will not be finalized.



FAR Violations in HUD   The Competition in Contracting Act (CICA) (41 U.S.C. § 253 (a)(1)(A)
                        (1994)) requires full and open competition in government procurements. A
Purchase Orders for     few exceptions to this requirement are authorized by 41 U.S.C. section 253
EEO Investigation of    (c)(3)(C); FAR section 6.3. Before awarding a contract using
                        noncompetitive procedures, an agency must prepare a written Justification
IG                      and Approval (J&A) containing sufficient facts and rationale to justify the
                        specific exemption relied upon. (41 U.S.C. § 253 (f)(3); FAR § 6.303-2)

                        HUD's J&A for limiting the competition to seven offerors cites the expert
                        exception to full and open competition (41 U.S.C. § 253(c)(3)(C); FAR
                        § 6.302-3(a)(2)(iii)) as authority for limiting competition and not
                        synopsizing in the CBD. However, HUD did not present in its J&A, or in its
                        subsequent submission to us, any justification for concluding that the
                        contractors should be considered experts for the purpose of the expert
                        exception to full and open competition.

                        The expert exception to full and open competition was added to CICA by
                        section 1055 of the Federal Acquisition Streamlining Act of 1994 (Pub. L.
                        No. 103-355, § 1055, 108 Stat. 3243, 3265 (1994)) to allow agencies to
                        acquire the services of an expert for any current or anticipated litigation or
                        dispute.10 Neither the statute nor its legislative history defines the term
                        “expert” or indicates any reason for the addition of the exception, and
                        CICA is similarly silent. While the FAR provides a few examples of the
                        services an expert might provide, neither it nor any other section of the
                        FAR defines the term “expert.”

                        In the only judicial or GAO decision interpreting the expert exception to
                        full and open competition, the Comptroller General sustained a bid protest
                        against the U.S. Air Force, finding that a sole-source contract to an
                        incumbent litigation-support contractor was not justified by the expert
                        exception to full and open competition. (SEMCOR, Inc.; H.J. Ford
                        Associates, Inc., B-279794, B-279794.2, B-279794.3 July 23, 1998.) After
                        considering several definitions of the term “expert” proposed by the


                        10
                         An expert exception to full and open competition for armed services acquisitions was also
                        added to CICA by the Federal Acquisition Streamlining Act of 1994 (Pub. L. No. 103-355,
                        § 1005, 108 Stat. 3243, 3254 (1994)).




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parties—as well as 31A Am. Jur. 2d at 19-20, 61-65, Expert and Opinion
Evidence, sections 1, 55-58—the Comptroller General concluded the
following:

“For the purpose of the exception … experts may be individuals who possess special skill or
knowledge of a particular subject, that may be combined with experience, which enables
them to provide opinions, information, advice, or recommendations to those who call upon
them.”

Regardless of whether the investigation of the Deputy Assistant IG's EEO
complaint constituted a current or anticipated litigation or dispute, we do
not believe that the services provided by the law firms here meet this
definition. While providing legal advice could qualify an individual as an
expert, it is not at all clear how much of the work performed for HUD
involved this service. Indeed, HUD hired the law firm of Squire, Sanders &
Dempsey exclusively to provide “expert services to the Department
officials and attorneys to assist in the defense of claims asserted” in the
EEO case brought by the Deputy Assistant IG. Furthermore, there is no
reason to believe that EEO investigators possess the special skill or
knowledge that would render them experts for the purpose of the CICA
exception, since it is reasonable to conclude that many competent
providers of such services exist and that such investigations are
commonplace. Accordingly, we believe that HUD could not properly rely
upon the expert exception to limit competition in this procurement.

In a March 9, 1999, memorandum to us, HUD maintained that even if it
improperly relied upon the expert exception, HUD properly conducted the
procurement using the simplified acquisition procedures of FAR part 13.
While the simplified acquisition procedures allow limited competition for
contracts with an anticipated value of less than $100,000, FAR section
5.101(a)(1) requires that agencies synopsize contract actions with an
anticipated value in excess of $25,000 in the CBD. HUD argues that because
synopsis in the CBD can add up to 45 days to the procurement process, its
urgent need for the services would have justified an exception to the
synopsis requirement.

FAR section 5.202(a)(2) provides an exception to the requirement for
synopsis in situations of unusual or compelling urgency where the
government would be seriously injured if the agency complies with the
requirement. We do not believe that sufficient urgency existed to justify an
exception to the synopsis requirement.




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HUD prepared the J&A for this procurement on August 4, 1998, 6 days
before the deadline for completing the investigation. The J&A explains the
urgency of the procurement as follows:

“It is also crucial that the investigation be accomplished in a timely manner in view of the
potential consequences (i.e. the integrity of the Department in fulfilling it's [sic] mission) of
having a highly visible individual (the HUD IG) charged with ‘allegations' and no action
being taken immediately by the Department.”

This explanation ignores the fact that HUD contracted with an investigative
firm through GSA's multiple-award-schedule contract on May 26, 1998, to
conduct the EEO investigation. After receiving HUD's approval of its
investigative plan, that firm began conducting interviews with the
expectation of completing the investigation within the 180-day limit. As
HUD had processed the complaint in a timely fashion, no urgent
requirement existed to contract with another investigator; and HUD cannot
justify its failure to synopsize on that basis.

Deputy Secretary Ramirez stated that he was unaware of these facts in the
summer of 1998 when he decided to hire a law firm to conduct the
investigation. Moreover, Deputy General Counsel Glaser informed us that,
for several reasons, including his perception of an environment of
pervasive racial discrimination in the OIG and the need for a more credible
investigator, HUD would have hired another contractor regardless of
whether he and Deputy Secretary Ramirez knew that another firm had
begun the investigation. Assuming these statements are true, Deputy
Secretary Ramirez's tardy decision, which was based on facts known to
HUD since February 1998, did not create a compelling urgency that would
allow HUD to deviate from procurement procedures.

An agency may not avoid competition requirements, such as synopsis of
proposed contract actions, on the basis of a lack of advance acquisition
planning. (10 U.S.C. § 2304(f)(5)(A); FAR § 6.301(c)(1).) FAR section 7.101
defines acquisition planning as the following:

“[T]he process by which the efforts of all personnel responsible for an acquisition are
coordinated and integrated through a comprehensive plan for fulfilling the agency need in a
timely manner and at a reasonable cost.”




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                      The Deputy Assistant IG filed his EEO complaint on February 12, 1998,
                      placing HUD on notice of the need for an investigation to be completed
                      within 180 days. Cognizant that this was a high-profile case, the Director of
                      HUD's EEO Division handpicked an investigative firm off the GSA
                      schedule. Coordination with Deputy Secretary Ramirez in a timely fashion
                      would have enabled the agency to decide whether the EEO Director's
                      selection of a GSA firm was appropriate. Since Deputy Secretary Ramirez
                      claimed, however, that he was not aware of the complaint until the summer
                      of 1998, when he received a copy in the normal course of business, HUD
                      officials did not engage in proper advance planning. HUD therefore created
                      the urgency on which it now relies. Given these circumstances, we do not
                      believe that HUD has shown a reasonable basis for avoiding competition
                      requirements.11



Deviations From       The decision to use non-GSA-schedule firms to conduct the EEO
                      investigation was a significant deviation from HUD's standard EEO
Standard Procedures   process. Ms. Chavis told us that she was shocked that HUD spent
                      approximately $100,000 on this investigation when the typical EEO
                      investigation, including those against Senior Executive Service (SES)
                      members, costs approximately $3,000. She also informed us that other
                      high-ranking HUD officials had filed EEO complaints since the Deputy
                      Assistant IG's complaint and that HUD assigned GSA-schedule contractors
                      to investigate each of these complaints. In a separate case, according to
                      Ms. Chavis, one complainant specifically requested the same type of
                      investigation that the Deputy Assistant IG had received.

                      The degree of involvement in this matter by Mr. Glaser is equally
                      extraordinary. As Mr. Glaser acknowledged during our interview, he is
                      widely perceived as Secretary Andrew Cuomo's “right-hand man” and his
                      “hammer.” In his position as Deputy General Counsel for Programs and
                      Regulations, Mr. Glaser had served as the GTR for legal service contracts
                      but had had no responsibility for EEO or procurement matters.
                      Nonetheless, he took the lead in terminating the CTI contract and
                      contracting with Mr. Patrick and Ms. Gibson, to include compiling the list
                      of potential contractors, contacting the Deputy Assistant IG's counsel to
                      request an extension of time to complete the investigation, evaluating the


                      11
                       Each of the reasons advanced by Deputy Secretary Ramirez and Deputy General Counsel
                      Glaser for contracting with the law firms existed at the time HUD contracted with the GSA-
                      schedule firm on May 26, 1998.




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                       proposals, reviewing the investigative plan, and consulting with the firms
                       during the investigation.

                       Both Ms. Hobson and Ms. Chavis told us that Mr. Glaser's involvement in
                       this investigation was unprecedented. According to Ms. Chavis, she was so
                       concerned by Mr. Glaser's order to terminate the CTI contract that she met
                       with Deputy Secretary Ramirez to confirm the independence of her office.
                       The Deputy Assistant IG's attorney told us that he had never before been
                       contacted by an agency's Office of General Counsel, rather than the EEO
                       office, to request an extension of an EEO investigation. Mr. Glaser had so
                       clearly taken control of the investigation that the Contracting Officer listed
                       Mr. Glaser, rather than a representative of the EEO office, as the GTR.



HUD's Justifications   HUD officials acknowledged that the contracting and investigative
                       procedures employed in this case deviated from HUD's usual EEO process
for Deviating From     but insisted that the deviation was justified for a number of reasons. HUD
Standard Procedures    officials told us that they deviated from the normal process because of their
                       perception that there is an environment of pervasive racial discrimination
                       in the OIG. Those officials told us that a contributing factor to this
                       perception is that HUD headquarters is staffed predominantly by African-
                       Americans, that HUD serves a predominantly minority clientele, and that
                       minorities have been traditionally underrepresented in the OIG. According
                       to the officials, this perception was reinforced by recent congressional and
                       mayoral complaints against the IG for racial bias in the OIG's selection of
                       three cities with African-American mayors as sites for HUD's Urban Fraud
                       Initiative.12 HUD officials told us that it was their understanding that the
                       OIG had an excessive number of EEO complaints when compared with
                       other HUD entities. However, they did not specify the number of
                       complaints upon which they were relying. These officials also referred to a
                       recent meeting with members of the OIG staff who had complained about
                       discrimination problems in the OIG. The officials further stated that they
                       had taken these concerns seriously.

                       HUD officials further told us that they had no choice but to contract for an
                       outside investigator with unquestionable credentials to conduct the EEO
                       investigation. They felt this was necessary in part because of the persons


                       12
                        To combat fraud involving HUD funding, HUD mortgage insurance, and public housing in
                       urban areas, the HUD OIG, with assistance from the U.S. Department of Justice, developed
                       the HUD Urban Fraud Initiative.




                       Page 13                          GAO/OSI-99-6 HUD Contracts for EEO Investigation of IG
                             B-282123




                             involved and the serious nature of the allegations. They noted that the
                             complainant is the Deputy Assistant IG for Investigation, a member of the
                             SES, and the highest-ranking African-American official in OIG. For further
                             support, they stated that the allegations involve a presidentially appointed
                             member of the SES who they feared would retaliate against OIG employees
                             for participating in the EEO process. In support of their position, they also
                             asserted that the allegations are broad in scope, focusing not only on
                             discrete personnel actions but also on the environment in the OIG, which
                             was described by the complainant as containing pervasive racism. HUD
                             officials additionally told us that HUD's African-American employees
                             wanted a credible outside investigator and would judge the senior
                             management's commitment to equal opportunity by how this case was
                             handled.

                             Many of the justifications HUD provided to us for deviating from its usual
                             EEO process are subjective in nature and therefore difficult to assess.
                             Moreover, some of the justifications HUD presented to us appear to be
                             based on only the speculation of the HUD officials. For example, Deputy
                             Secretary Ramirez's perception that the OIG had an environment of
                             pervasive racial discrimination was based solely on what he had heard and
                             read in the newspapers. Although his perception had existed for some time
                             prior to the Deputy Assistant IG's complaint, he admitted that he had never
                             inquired of HUD employees if such conditions existed nor had HUD's
                             Office of Departmental EEO told him that the OIG had extensive problems
                             concerning EEO issues. Indeed, when we inquired, we found that the OIG
                             did not have an excessive number of EEO complaints, which contradicted
                             what Mr. Glaser and others had told us. Additional information we found
                             substantially contradicted several other factors cited as justifications for
                             HUD's actions.


Not an Excessive Number of   Mr. Glaser expressed concern about the high number of EEO complaints by
EEO Complaints in the OIG    employees in the OIG especially when compared with the number of
                             complaints in other HUD units. He cited this as a factor supporting the
                             choice to contract with non-GSA-schedule law firms. Mr. Glaser added that
                             during Secretary Cuomo's tenure (1997-present), HUD's Office of General
                             Counsel, with about half as many EEO complaints as the OIG, was a good
                             basis for comparison when considering the two offices' relative size and
                             personnel composition.

                             The Director of HUD's EEO Division provided us data indicating that the
                             rate of EEO complaints filed by OIG employees was equal to or below that



                             Page 14                      GAO/OSI-99-6 HUD Contracts for EEO Investigation of IG
                                          B-282123




                                          of HUD's overall filing rate for 3 of the 5 fiscal years, including the most
                                          recent 3 years, since IG Gaffney was sworn in in 1993. Further, since the
                                          IG's confirmation, the OIG's rate of complaint filing had never been the
                                          highest in HUD and had always been much lower than that of HUD's Office
                                          of the Secretary. Indeed, the OIG's rate of EEO complaint filings was never
                                          twice that of the Office of General Counsel during Secretary Cuomo's
                                          administration. In fiscal year 1998, it was lower than that of the Office of
                                          General Counsel. See table 1.



Table 1: EEO Complaints Filed as a Percentage of Total Employees in Units

Unit                                           FY 94            FY 95             FY 96             FY 97                FY 98
                                                                     a
Region 1                                            0.2
                                                                     a
Region 2                                            0.2
                                                                     a
Region 3                                            0.4
                                                                     a
Region 4                                            1.0
                                                                     a
Region 5                                            0.9
                                                                     a
Region 6                                            1.7
                                                                     a
Region 7                                            0.8
                                                                     a
Region 8                                            0.4
                                                                     a
Region 9                                            1.1
                                                                     a
Region 10                                           0.5
Office of the Secretary                             5.0           7.5               8.8              10.3                 17.5
Field Management                                30.0              0.9               0.0               0.6                   0.3
Community Planning and                              1.2           0.7               0.2               2.5                   1.0
Development
Office of General Counsel                           1.9           1.4               0.6               1.4                   1.3
Office of Legislative and                           0.0           0.0               0.0               0.0                   6.7
Congressional Relations
Government National Mortgage                        0.0           0.0               1.6               0.0                   1.8
Association
Office of Housing                                   3.9           1.3               1.0               1.5                   1.7
Office of Public and Indian Housing                 1.7           1.4               1.4               2.3                   1.2
Office of Fair Housing and Equal                10.4              5.1               2.8               6.3                   3.5
Opportunity
Policy Development and Research                     0.0           0.0               0.0               0.0                   1.0
Administration                                      1.3           0.7               1.0               1.8                   0.9
Office of Inspector General                         2.2           2.0a              1.0               1.7                   1.1
Office of the Chief Financial Officer               1.6           0.3               0.0               0.0                   0.0
                                                                                                                     Continued



                                          Page 15                        GAO/OSI-99-6 HUD Contracts for EEO Investigation of IG
                             B-282123




Unit                               FY 94                FY 95                FY 96                 FY 97                   FY 98
Office of Lead Based Paint             0.0                 0.0                   4.0                10.7                       4.3
HUD as a whole                         1.4                 1.4                   1.0                  2.0                      1.5
                                                                                                Continued from Previous Page
                             Note: Percentages are based on the number of unit employees at the end of the fiscal year and the
                             number of complaints filed in the unit during the fiscal year.
                             a
                              In 1995, part way through fiscal year 1995, HUD began counting its regional employees (for reporting
                             purposes) as part of the headquarters-based units in which they functioned. The OIG, however, had
                             always counted its employees as headquarters-based; none had been included in previous regional
                             figures.
                             Source: GAO analysis of HUD data.


                             Further, according to Ms. Hobson, OIG did not have a problem regarding
                             the number of EEO complaints. Nor had the OIG come to her office's
                             attention as having racial discrimination problems. According to
                             Ms. Hobson, she also believed that the EEO Division had not made a
                             finding of racial discrimination against IG Gaffney in the previous 5 years.


Justice and PCIE Found No    Both Mr. Glaser and Stephen Carbury, HUD's Chief Procurement Officer,
Basis for Complaints of      stated that the negative publicity surrounding IG Gaffney's selection of
                             Baltimore, San Francisco, and New Orleans as sites for HUD's Urban Fraud
Racial Bias in Urban Fraud
                             Initiative was a factor in breaking with normal HUD contracting and
Initiative City Selection    investigative procedures and contracting with non-GSA-schedule law firms.
                             The three cities had African-American mayors; and in March 1998, a U.S.
                             Representative asked the President's Council on Integrity and Efficiency
                             (PCIE)13 to investigate whether a pattern of racial bias in the OIG had led to
                             the cities' selection.14 In April 1998, the National Conference of Black
                             Mayors and the U.S. Conference of Mayors called on the Congress and
                             others to authorize an inquiry into the matter.




                             13
                              Established by executive order in 1981, PCIE is an interagency council charged with
                             promoting integrity and effectiveness in federal programs. Its membership consists
                             primarily of presidentially appointed and Senate-confirmed IGs. The chairman of PCIE is
                             the Deputy Director for Management of the Office of Management and Budget. Among its
                             other members is an official of the Federal Bureau of Investigation (FBI), designated by the
                             Director of the FBI.
                             14
                              In his letter to PCIE, Representative Elijah Cummings, when asking for an investigation,
                             also indicated his concern about the lack of minorities in key positions within the HUD OIG
                             and HUD itself. HUD officials also raised this and similar congressional concerns as
                             supporting their decision to select non-GSA-schedule firms.




                             Page 16                               GAO/OSI-99-6 HUD Contracts for EEO Investigation of IG
                             B-282123




                             As part of its normal process, PCIE initially presented the complaint it
                             received against IG Gaffney to the Department of Justice's Public Integrity
                             Section. PCIE requested a determination of whether the complaint, if
                             proved, would constitute prosecutable violations of federal criminal law.
                             Prior to HUD's award of the contracts to the non-GSA-schedule firms, the
                             Justice Department determined that there was insufficient information to
                             warrant a criminal investigation. This conclusion was subsequently
                             reported to PCIE. Further, PCIE's Integrity Committee,15 after a thorough
                             administrative review of the complaint, concluded in January 1999 that the
                             complaint was not substantiated. It found no evidence to support the
                             allegations of racial bias related to the selection of the three cities.

                             While HUD officials could not have known that PCIE would conclude that
                             the complaint was unsubstantiated when they awarded the contracts, they
                             could have learned that Justice had already determined that there was
                             insufficient information to warrant a criminal investigation. HUD officials
                             also could have known that the HUD OIG's Diversity Liaison Group
                             supported the Urban Fraud Initiative and IG Gaffney's selection of the
                             three selected cities when the group met in April 1998. The group, made up
                             of minority and nonminority OIG employees, reaffirmed its support for the
                             Urban Fraud Initiative and for the OIG's independence to make its own
                             decisions, when it met later in April 1998 with the Chairman and members
                             of the Subcommittee on Veterans Affairs, HUD, and Independent Agencies,
                             House Committee on Appropriations.


Not Permitted to Determine   According to Mr. Glaser, about seven OIG employees came to Samuel
Authenticity of Reported     Hutchinson, HUD's Associate General Counsel for Human Resources, and
                             him asking to be removed from the OIG because of the office's racial
OIG Staff Discussions of
                             climate and their treatment by managers. Mr. Glaser did nothing to address
Discrimination Problems      the issue. He cited this meeting and a meeting between those OIG staff and
                             the Chairman of a congressional committee to complain about the OIG's
                             racial climate as factors in deviating from HUD's usual EEO process to
                             investigate the subject EEO complaint. Mr. Hutchinson repeatedly
                             recommended that we speak with these and other OIG employees to hear
                             their views about the OIG's racial climate. Yet when we requested to speak
                             with the OIG staff who had reportedly spoken with Mr. Hutchinson,


                             15
                              The Integrity Committee, whose chairperson is PCIE's FBI representative, is responsible
                             for receiving, reviewing, and referring for investigation allegations of wrongdoing against
                             IGs and Deputy IGs.




                             Page 17                           GAO/OSI-99-6 HUD Contracts for EEO Investigation of IG
                              B-282123




                              Mr. Glaser, and members of Congress, our request was denied; and we were
                              told that they all wished to remain anonymous.


Unique Positions of Persons   HUD officials also stated that their deviation from normal procedures was
Involved and Seriousness of   justified by the positions of the persons involved in the complaint and the
                              nature of the allegations. The combination of the Deputy Assistant IG's
the Allegations
                              position as the highest-ranking African-American in the OIG, the IG's
                              unique position within the agency, and the serious nature of the allegations
                              did make this a high-profile case. However, we found that HUD had
                              previously handled other high-profile cases that shared many of the same
                              characteristics without resorting to such extraordinary measures.

High Profile                  HUD officials cited the high profile, unique nature of this case as a reason
                              for hiring a non-GSA-schedule investigator. However, Ms. Chavis and
                              Ms. Hobson recognized early on that the case had a high profile and had
                              already taken steps to ensure that it was handled by a high-quality
                              investigator. Thus, HUD selected an investigative firm with a record of
                              providing high-quality investigative reports and requested the firm's best
                              investigator. According to Ms. Hobson, she was comfortable with the
                              ability of the firm and the investigator. We found nothing to suggest that the
                              actions of HUD's EEO professionals were not adequate to address the
                              seriousness of this complaint.

Senior Positions of Persons   HUD officials also cited the senior positions of those involved in the
Involved                      subject EEO complaint as a factor in going outside HUD's EEO
                              procurement norm. The complainant, in an SES position as the Deputy
                              Assistant IG for Investigation, was the highest-ranking African-American in
                              the OIG. The official who allegedly discriminated against him, IG Gaffney,
                              held a presidentially appointed SES position as head of the OIG. However,
                              this was not the first time that HUD had dealt with an EEO complaint
                              involving SES employees. In fact, two other HUD SES employees filed EEO
                              complaints against other HUD SES officials during the same period as the
                              subject complaint. The usual GSA-schedule investigators were assigned to
                              their complaints.

No Indication That IG Would   HUD officials referred to IG Gaffney's ability to retaliate against OIG
Retaliate                     employees who participate in the EEO process as another reason for using
                              a non-GSA-schedule firm. They also voiced concern that the employees'




                              Page 18                      GAO/OSI-99-6 HUD Contracts for EEO Investigation of IG
B-282123




fears of retaliation would have a chilling effect on their willingness to
participate in the EEO investigation.16

This was not the first EEO complaint in which IG Gaffney was alleged to
have discriminated against employees. According to a HUD OIG summary,
between her appointment in 1993 and the subject EEO complaint in
February 1998, IG Gaffney was named eight times in formal EEO
complaints.17 HUD's Office of Departmental EEO did not take any special
precautions in these complaints to protect the complainants or witnesses
against retaliation or intimidation by the IG. Nor did we find evidence that
IG Gaffney had retaliated against these employees. OIG's rate of
complaints, which approximates that of HUD as a whole (see table 1),
suggests that OIG employees are not afraid to use the EEO process.
Moreover, when we assessed the minutes of an April 27, 1998, meeting
between members of the Subcommittee on Veterans Affairs, HUD, and
Independent Agencies, House Committee on Appropriations, and
representatives of the OIG's 27-member Diversity Liaison Group, we found
that the group had commented frankly about the OIG's minority recruiting,
diversity, racial climate, and work environment. This too suggests that OIG
employees feel free to speak their minds without fear of retaliation or
intimidation by the IG.

We also found no evidence that a non-GSA-schedule firm was better
equipped than a GSA-schedule firm to protect employees against
retaliation. Moreover, title VII specifically protects employees from
retaliation by employees for participating in the EEO process,18 and we
found no evidence that this statutory provision was inadequate to protect
employees from retaliation by the IG.


16
 On Oct. 19, 1998, OIG initiated an audit into the procurement of EEO investigative services
by HUD's Office of Procurement and Contracts (OPC). Although HUD officials have cited
this action as an example of IG Gaffney's abuse of her auditing power, it was an inquiry into
the procurement of the EEO investigative services rather than an attempt to discourage
HUD or OIG employees from participating in the EEO investigation. Moreover, OPC
personnel do not appear to have been intimidated by IG Gaffney as they refused to provide
the documents requested by the OIG team and promptly reported the incident to HUD
management, who requested a PCIE investigation.
17
 As of July 19, 1999, four of the eight complaints had been dismissed and the dismissals
upheld after appeal; two complaints had been settled; one complaint had been dismissed
with the dismissal appealed to the EEOC; and no final agency decision had been reached
regarding the eighth complaint, with the case thus ongoing.
18
     42 U.S.C. § 2000e-3(a) (1994).




Page 19                               GAO/OSI-99-6 HUD Contracts for EEO Investigation of IG
Scope and             We conducted our investigation between December 1998 and March 1999.
                      During that time, we interviewed HUD senior management officials, HUD
Methodology           procurement officials, HUD EEO officials, and senior officials of the HUD
                      OIG. We also interviewed employees of EEOC and the complainant's
                      attorneys. In addition, we reviewed documents, contracts, and statistical
                      data pertinent to the scope of our investigation.

                      We requested an interview with the Secretary of HUD, Andrew Cuomo. Our
                      request was denied. In addition, senior HUD management denied our
                      requests to conduct initial and follow-up interviews of other pertinent HUD
                      personnel, citing its ongoing EEO investigation, and insisted that
                      Mr. Bucklin, acting as agency counsel, attend interviews of other HUD
                      employees. Mr. Bucklin disrupted an interview with Deputy Secretary
                      Ramirez by constantly objecting to our questions and taking breaks to
                      confer with the Deputy Secretary outside of our presence. Although Gail
                      Laster, HUD's General Counsel, wanted to talk with us without Mr. Bucklin
                      present, HUD officials refused. Further, HUD officials requested that we
                      interview a group of OIG employees who, the officials said, had complained
                      about the OIG's racial climate. However, when we asked to do so, we were
                      informed that the individuals wished to remain anonymous.


                      As agreed with your office, unless you announce its contents earlier, we
                      plan no further distribution of this report until 30 days after the date of this
                      letter. At that time, we will send copies of this report to interested
                      congressional committees and make copies available to others upon
                      request. If you have questions about our investigation, please contact me or
                      Ronald Malfi at (202) 512-6722. John Ryan was a key contributor to this
                      case.

                      Sincerely yours,




                      Robert H. Hast
                      Acting Assistant Comptroller General
                      for Special Investigations




(600503)      Leter   Page 20                       GAO/OSI-99-6 HUD Contracts for EEO Investigation of IG
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