Issue Date
May 22, 2009
Audit Report Number:
2009-CH-0001
TO: James M. Martin, Deputy Chief Financial Officer, F
FROM: Heath Wolfe, Regional Inspector General for Audit, 5AGA
SUBJECT: The U.S. Department of Housing and Urban Development Complied with the
Office of Management and Budget’s Competitive Sourcing Requirements
Governing Its Management of Human Capital
HIGHLIGHTS
What We Audited and Why
We audited the U.S. Department of Housing and Urban Development’s (HUD)
management of human resources. We initiated the audit based on our annual
audit plan and our strategic plan to help HUD resolve its major management
challenges. Our objective was to determine whether HUD implemented a process
and methodolgy to determine when to contract out for services or when to keep
the services in house. Our audit did not include reviewing procurement items
and/or competitions before December 1, 2004, and it did not include a review of
HUD’s procurement and/or contracting activities to determine whether they meet
applicable federal requirements. This is the final of three audit reports regarding
HUD’s management of its human resources.
What We Found
HUD complied with the Office of Management and Budget’s (OMB) requirements
for the competition of commercial activities (competitive sourcing procedures). All
three of the streamline competitions statistically selected for review contained
adequate documentation to support HUD’s assessment of whether government
employees should perform tasks that are readily available in the commercial
marketplace or rely on the private sector for the performance of those tasks.
What We Recommend
Since we did not identify any deficiencies, there are no recommendations in this
audit report.
Auditee’s Response
We provided our discussion draft audit report to HUD’s Deputy Chief Financial
Officer on May 8, 2009. The Deputy Chief Financial Officer waived the need for
an exit conference and had no comments on our draft audit report.
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TABLE OF CONTENTS
Background and Objective 4
Results of Review 6
Scope and Methodology 8
Internal Controls 9
3
BACKGROUND AND OBJECTIVE
Competitive sourcing is a process that compares private-sector and government bids to determine
the most cost-effective way to buy services. This government-wide initiative was introduced
under the President’s Management Agenda (Agenda) of fiscal year 2002. The Agenda is the
starting point for government and management reform. The focus of the Agenda is to
• Identify five government-wide and nine agency-specific goals to improve federal
management and deliver results and
• Reflect President Bush administration’s commitment to achieve immediate, concrete, and
measurable results.
The competitive sourcing initiative is expected to achieve efficient and effective competition
between public and private sources. This initiative promotes innovation and efficiency and
consistently generates significant savings and noticeable performance improvements.
The Risk Management Division (Division) in the U.S. Department of Housing and Urban
Development’s (HUD) Office of the Chief Financial Officer provides oversight and coordinates
the annual Federal Activities Inventory Reform (FAIR) Act of 1998 requirements. Further, the
Division issues and implements competitive sourcing policy, provides recommendations to the
competitive sourcing official on competitions, monitors competitions and outcomes, and serves
as the primary interface with the Office of Management and Budget (OMB).
Additionally, the longstanding policy of the federal government was to rely on the private sector
for needed commercial services. To ensure that the American people receive maximum value
for their tax dollars, commercial activities should be subject to the forces of competition. In
accordance with OMB Circular A-76, Performance of Commercial Activities, federal agencies
shall:
• Identify all activities performed by government personnel as either commercial or
inherently governmental.
• Perform inherently governmental activities with government personnel.
• Use a streamlined or standard competition to determine if government personnel should
perform a commercial activity.
• Apply the Federal Acquisition Regulations 48 CFR [Code of Federal Regulations],
chapter 1, in conjunction with the circular, for streamlined and standard competitions.
• Comply with procurement integrity, ethics, and standards of conduct rules, including the
restrictions at 18 U.S.C. [United States Code] 208, when performing streamlined and
standard competitions.
• Designate, in writing, an assistant secretary or equivalent level official with responsibility
for implementing the circular, hereafter referred to as the competitive sourcing official
(official). Except as otherwise provided by the circular, the official may delegate, in
writing, specified responsibilities to senior-level officials in the agency or agency
components.
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• Require full accountability of agency officials designated to implement and comply with
the circular by establishing performance standards in annual performance evaluations.
• Centralize oversight responsibility to facilitate fairness in streamlined and standard
competitions and promote trust in the process. Agencies must allocate resources to
effectively apply a clear, transparent, and consistent competition process based on lessons
learned and best practices.
• Develop government cost estimates for standard and streamlined competitions in
accordance with attachment C using the COMPARE costing software. Agencies shall
not use agency budgetary estimates to develop government cost estimates in a
streamlined or standard competition.
• Track execution of streamlined and standard competitions.
• Assist adversely affected federal employees in accordance with 5 CFR Parts 330 and 351.
The statutory veterans’ preference for appointment and retention (5 U.S.C. 1302, 3301,
3302, and 3502) applies to actions taken pursuant to the circular.
• Not perform work as a contractor or subcontractor to the private sector, unless specific
statutory authority exists or the official receives prior written OMB approval.
We audited HUD as part of our strategic plan to help HUD resolve its major management
challenges and our annual audit plan.
Our objective was to determine whether HUD implemented a process and methodolgy to
determine when to contract out for services or when to keep the services in house. Our audit did
not include reviewing procurement items and/or competitions before December 1, 2004, and it
did not include a review of HUD’s procurement and/or contracting activities to determine
whether they meet applicable federal requirements.
5
RESULTS OF REVIEW
HUD Complied with OMB’s Requirements for the Competition of
Commercial Activities
HUD complied with OMB’s requirements for the competition of commercial activities (competitive
sourcing procedures). All three of the streamline competitions statistically selected for review
contained adequate documentation to support HUD’s assessment of whether government employees
should perform tasks that are readily available in the commercial marketplace or rely on the private
sector for the performance of those tasks.
Competitive Sourcing
The Agenda announced in 2001 and implemented in 2002 is a strategy for
improving the management of the federal government. It focuses on five areas of
management weakness across the government where improvements and the most
progress could be made. One of its focuses is competitive sourcing. Competitive
sourcing is a process that allows the private sector to compete with government
employees for the performance of services and/or tasks that are readily available
in the commercial marketplace. It was expected to generate significant savings
and noticeable performance improvements.
HUD Complied with OMB’s
Competitive Sourcing Policy
During our audit period, December 1, 2004, through September 30, 2008, HUD
conducted six competitive sourcing competitions:
• Spanish language translation and localization support services for HUD’s
Web site,
• Financial reporting services,
• Employee service center,
• Financial management systems compliance reviews,
• Motor pool services, and
• Training support services.
Of the six competitive sourcing competitions, we statistically selected three
(Spanish language translation and localization support services for HUD’s Web
site, financial reporting services, and the employee service center) to review for
compliance with the OMB’s requirements regarding competition of commercial
activities.
6
Our review determined that HUD complied with OMB’s competitive sourcing
requirements. For the activities/tasks that were selected for purchase in the
commercial market, HUD provided documentation to support its decisions to
contract for services or perform the services in house.
7
SCOPE AND METHODOLOGY
To accomplish our objective, we reviewed
• The public announcement data obtained from the Office of the Chief Financial Officer’s
Risk Management Division identified the number of HUD’s competitive sourcing
competitions that were implemented during our review period October 1, 2006, through
September 30, 2008. This period was extended back to December 1, 2004, to obtain
sufficient competitive outsourcing competitions for review. Our audit did not include
reviewing procurement items and/or competitions before December 1, 2004, and it did
not include a review of HUD’s procurement and/or contracting activities to determine
whether they meet applicable federal requirements.
• Using the public announcements, we developed a sampling plan, statistically selected
three of the six competitions identified and reviewed all the necessary forms/documents
from HUD’s competitive sourcing files to determine whether the complied with OMB’s
competitive sourcing requirements. HUD’s competitive sourcing competitions selected
for review were
o Spanish language translation and localization support services for HUD’s Web
site,
o Financial reporting services, and
o Employee service center.
• We reviewed the requirements under OMB Circular A-76, Performance of Commercial
Activities, and the FAIR Act of 1998.
Originally, there were seven competitive sourcing competitions, the seventh being HUD’s
multifamily housing rental assistance contract administration for programs other than Section 8,
which was never implemented. According to HUD’s Deputy Chief Financial Officer, the
multifamily standard competition was a multiple contract competition that was cancelled.
We also interviewed HUD’s management and staff.
We performed our audit work between October 2008 and April 2009. We conducted our audit at
HUD’s headquarters in Washington, DC and HUD’s Chicago regional office. The audit covered
the period October 1, 2006, through September 30, 2008. We extended this period as necessary.
We conducted the audit 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 conclusions based on our
audit objective.
8
INTERNAL CONTROLS
Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following controls are achieved:
• Program operations,
• Relevance and reliability of information,
• Compliance with applicable laws and regulations, and
• Safeguarding of assets and resources.
Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.
Relevant Internal Controls
We determined that the following internal controls were relevant to our audit
objective:
• Program operations - Policies and procedures that management has
implemented to reasonably ensure that a program meets its objectives.
• Validity and reliability of data - Policies and procedures that management has
implemented to reasonably ensure that valid and reliable data are obtained,
maintained, and fairly disclosed in reports.
• Compliance with laws and regulations - Policies and procedures that
management has implemented to reasonably ensure that resource use is
consistent with laws and regulations.
• Safeguarding resources - Policies and procedures that management has
implemented to reasonably ensure that resources are safeguarded against
waste, loss, and misuse.
We assessed the relevant controls identified above.
A significant weakness exists if management controls do not provide reasonable
assurance that the process for planning, organizing, directing, and controlling
program operations will meet the organization’s objectives.
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Significant Weakness
Based on our review, no significant weakness noted.
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The U.S. Department of Housing and Urban Development Complied with the Office of Management and Budget's Competitive Sourcing Requirements Governing Its Management of Human Capital
Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-05-22.
Below is a raw (and likely hideous) rendition of the original report. (PDF)