oversight

Audit of GSA's Use of the NASA Solutions for Enterprise-Wide Procurement Contract

Published by the General Services Administration, Office of Inspector General on 2019-08-22.

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

          Office of Audits
          Office of Inspector General
          U.S. General Services Administration




               Audit of GSA’s Use of the
               NASA Solutions for
               Enterprise-Wide
               Procurement Contract
               Report Number A170122/Q/6/P19005
               August 22, 2019




A170122/Q/6/P19005
                 Office of Audits
                 Office of Inspector General
                 U.S. General Services Administration

We performed an audit of GSA’s use of the NASA Solutions for Enterprise-Wide Procurement
(SEWP) contract and have no reportable findings. However, we are reporting an observation for
management’s attention.

We performed this audit because we identified that GSA acquisition personnel were placing
large information technology orders under the SEWP contract instead of through GSA contract
sources. Our objective was to determine why GSA used the SEWP contract instead of GSA
contract vehicles and if these procurements complied with applicable laws, regulations, and
policies.

See Appendix A – Scope and Methodology for additional details.

Background

The SEWP contract is a Government-Wide Acquisition Contract that provides for the acquisition
of information technology products and product-based services. The SEWP contract is an
authorized contracting vehicle that any federal agency can use; however, in a memorandum
dated October 11, 2012, the Acting GSA Administrator instructed GSA contracting officers to
use existing GSA acquisition vehicles before considering non-GSA sources.

NASA is required to ensure SEWP prices are fair and reasonable at the contract level in
accordance with Federal Acquisition Regulation (FAR) 15.4 - Contract Pricing. Delivery orders
placed under the SEWP contract must comply with FAR 16.505 - Ordering, to provide all
qualified contract holders fair opportunity to submit a quote. If ordering agencies follow fair
opportunity requirements, there is no requirement to receive more than one quote to place an
order.

GSA purchased $123 million of information technology products through the SEWP contract
during Fiscal Years 2016 and 2017. The $123 million total included a service fee of 0.39 percent,
or approximately $480,000, collected by the SEWP program. 1 These procurements included
both GSA purchases and purchases made by GSA on behalf of other agencies through GSA’s
Assisted Acquisition Services.




1
 For the period of our audit, the SEWP fee was 0.39 percent but was reduced to 0.375 percent effective
February 1, 2018.


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Results

GSA primarily used the SEWP contract for the sampled orders because the required items were
either not available through GSA’s Multiple Award Schedules Program, or items could not be
provided within the customer’s requested timeframe. GSA complied with applicable regulations
and GSA policies when making procurements through the SEWP contract. As a result, we have
no reportable audit findings. However, we identified an observation for management’s
attention. Specifically, one third of the GSA orders received only the minimally required one
quote.

Observation – Use of the SEWP contract vehicle may not ensure adequate competition.

While FAR 16.505 ordering procedures do not require multiple quotes as long as GSA complies
with fair opportunity requirements, it is concerning that the GSA orders generated only limited
or no competition. As shown in Figure 1, a majority of the orders GSA placed under the SEWP
contract generated limited competition. Of our sample of 15 orders totaling $79.7 million, 5
orders were awarded based on one quote, and 3 were awarded based on two quotes.
Collectively, these orders accounted for 65 percent of the dollars in our sample.

                   Figure 1 – Number of Quotes Received for Sample SEWP Orders

          # of Quotes   # of Orders   % of Orders     $ Value of Orders   % of Dollars
              1                   5             33%       $ 33,119,976              42%
              2                   3             20%       $ 18,490,790              23%
              3                   3             20%       $ 14,310,898              18%
              >3                  4             27%       $ 13,757,214              17%
                                 15                       $ 79,678,878

Without adequate price competition, GSA and its customers are at risk of overpaying for
contract items under SEWP. GSA contracting officers told us that they rely on SEWP contract
level pricing when limited or no competition occurs. However, SEWP officials told us that the
program does not emphasize contract level pricing because they expect customers to receive
multiple quotes at the order level to drive competitive pricing. Information on SEWP’s website
about task order competition states, “This internal competition provides an incentive for
contract holders to provide the best possible price in order to be selected for award.” As
illustrated in Figure 2, the SEWP program’s reliance on price competition at the task order level
places GSA at risk of overpaying when orders do not generate adequate competition.




A170122/Q/6/P19005                          2
   Figure 2 – Using SEWP May Not Result in the Government Receiving Competitive Prices




The Competition in Contracting Act (41 USC 253) was passed into law in 1984 as a foundation
for the FAR. As emphasized in an October 27, 2009, memorandum issued by the Office of
Management and Budget entitled Increasing Competition and Structuring Contracts for the Best
Results, competition “drives down costs, motivates better contractor performance, helps to
curb fraud and waste, and promotes innovation.” The memorandum includes a discussion of
the increased level of government obligations made through task and delivery order contracts
and the need for agencies to evaluate the extent to which task and delivery order competition
is being achieved.

GSA may be able to increase competition on SEWP orders by requiring contracting officers to
obtain at least three quotes. The FAR supports three quotes as adequate competition for other
contract types. For instance, FAR 8.405 - Ordering procedures for Federal Supply Schedules,
states that contracting officers should ensure that at least three quotes are received from
contractors for orders exceeding $3,500. Further, FAR 14.408 - Award, states that if a
contracting officer receives fewer than three bids when sealed bidding practices are used, they
must ascertain the reasons for the lack of competition and initiate action to increase
competition under future solicitations for the same or similar items.

Conclusion

GSA awarded orders under the SEWP contract vehicle in accordance with applicable
regulations and GSA policies; as a result, we have no reportable audit findings. However, we
identified an observation for management’s attention. GSA and its customers are at risk of
overpaying for contract items under the SEWP contract when adequate competition is not
achieved at the task order level. To strengthen competition, GSA may consider requiring
contracting officers to obtain three or more quotes from qualified contractors for competitive
task orders.



A170122/Q/6/P19005                         3
GSA Comments

The FAS Commissioner acknowledged our observation. FAS’s written comments are included in
their entirety in Appendix B.

Audit Team

This audit was managed out of the Heartland Region Audit Office and conducted by the
individuals listed below:

       Michelle Westrup       Regional Inspector General for Auditing
       Erin Priddy            Audit Manager
       Tracy Twombly          Auditor-In-Charge




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Appendix A – Scope and Methodology

We reviewed GSA orders through the SEWP program for Fiscal Years 2016 and 2017. These
orders included both GSA purchases and purchases made by GSA on behalf of other agencies
through GSA’s Assisted Acquisition Services.

To accomplish our objective, we:

   •   Sampled 15 of 192 GSA SEWP orders, representing 65 percent of all GSA SEWP
       purchases for the sample period;
   •   Reviewed order documentation for the sampled SEWP orders;
   •   Interviewed GSA contracting officers, ordering agency officials, and contract holders;
   •   Interviewed NASA SEWP officials; and
   •   Reviewed applicable FAR, the Competition in Contracting Act, and GSA policy.

We conducted the audit between September 2017 and June 2018 in accordance with generally
accepted government auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objective. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our audit objective.

Internal Controls

Our assessment of internal controls was limited to those necessary to address the objective of
the audit.




A170122/Q/6/P19005                        A-1
Appendix B – GSA Comments




A170122/Q/6/P19005          B-1
Appendix C – Report Distribution

GSA Administrator (A)

GSA Deputy Administrator (AD)

Commissioner (Q)

Commissioner (P)

Acting Deputy Commissioner (Q1)

Deputy Commissioner (Q2)

Director (QT2F)

Deputy Chief Acquisition Officer/SPE (M1V)

Chief of Staff (Q0A)

Senior Advisor (Q0A)

Assistant Commissioner, Office of Policy and Compliance (QV)

Financial Management Officer, FAS Financial Services Division (BGF)

Procurement Analyst (QF1)

Supervisory Management and Program Analyst (QF0A)

Supervisory Management and Program Analyst (QF0BA)

Director of Financial Management (BG)

Chief Administrative Services Officer (H)

Audit Management Division (H1EB)

Assistant Inspector General for Auditing (JA)

Director, Audit Planning, Policy, and Operations Staff (JAO)




A170122/Q/6/P19005                          C-1