HomeReportsAll DoD OIG Reports

Defense Organizations Price Reasonableness Determinations for Federal Supply Schedule Orders for Supplies

DODIG-2017-112

PRINT  |  E-MAIL

Objective

We determined whether Defense organizations made determinations of fair and reasonable pricing for General Services Administration (GSA) Federal supply schedule orders awarded for purchases of supplies. Supplies purchased from the GSA Federal supply schedule are considered commercial items. The Federal supply schedule program allows the Government to purchase commercial supplies and services—such as software licenses, batteries, and digital maps—at prices associated with volume buying. We reviewed a nonstatistical sample of 57 orders, valued at $48 million, at Washington Headquarters Services (WHS), DoD Human Resources Activity (DoDHRA), Defense Health Agency (DHA), and Defense Threat Reduction Agency (DTRA). This is the third and last in a series of audits on GSA Federal supply schedule orders.

Background

The Director, Defense Procurement and Acquisition Policy (DPAP), issued policy memorandum, “Class Deviation—Determination of Fair and Reasonable Prices When Using Federal Supply Schedule Contracts,” (class deviation) on March 13, 2014. The class deviation requires DoD contracting personnel to make determinations of fair and reasonable pricing for GSA Federal supply schedule orders for supplies and fixed-price services. A deviation is the issuance or use of a policy, procedure, solicitation provision, contract clause, method, or practice of conducting acquisition actions of any kind at any stage of the acquisition process that is inconsistent with the Federal Acquisition Regulation. A class deviation is a change from guidance that affects more than one contract action.

Finding

WHS, DoDHRA, and DTRA contracting officers made adequate price reasonableness determinations for 10 orders, valued at $7.7 million. Specifically, WHS, DoDHRA, and DTRA contracting officers compared the only quote to adequately prepared independent Government estimates (IGEs), compared the only quote to historical prices that were specifically identified, or compared prices offered under two quotes. In addition, WHS, DoDHRA, and DTRA contracting officers signed and dated price reasonableness determinations for the 10 orders.

However, WHS, DoDHRA, DHA, and DTRA contracting officers did not adequately document and support whether the prices paid for 47 orders, valued at $40.3 million, were fair and reasonable. Specifically:

  • For 40 orders, WHS, DoDHRA, DHA and DTRA contracting officers did not adequately document fair and reasonable pricing. Specifically, the contracting officers did not make price reasonableness determinations, did not sign price reasonableness determinations they made, did not approve in writing price reasonableness determinations made by contract specialists, or made price reasonableness determinations after the award. A DoDHRA contracting officer stated that the contracting officer’s signature on the order certified that the price was fair and reasonable. WHS, DHA, and DTRA contracting officers stated that not signing and dating the price reasonableness determinations was an oversight.
  • For 11 orders, WHS, DoDHRA, and DTRA contracting officers relied on inadequate IGEs that did not identify the source of the information because they relied on the knowledge of the preparers of the IGEs rather than asking the preparers to document and support the estimate and because they were under tight timeframes to award the orders.
  • For 10 orders, WHS, DoDHRA, DHA, and DTRA contracting officers relied on the price lists of the same vendor that submitted the only quote. Contracting officers stated that they were too busy to perform additional price analysis, that the orders were sole-source awards, that they performed other price analysis but did not document the other price analysis in the contract file, or that they performed other price analysis but could not locate the documentation.
  • For one order involving one quote, a DoDHRA contracting officer relied on a discount that the vendor provided as the only price analysis technique. The contracting officer had left the DoDHRA; therefore, we were unable to determine why the contracting officer relied only on the discount.
  • For one order involving two quotes, a WHS contracting officer used a quote eliminated from consideration for technical reasons to make the price reasonableness determination without verifying whether the price was still valid for comparison purposes. The contracting officer had left the WHS; therefore, we were unable to determine why that occurred.
  • For two orders involving one quote, the WHS contracting officers stated that they performed price analysis, but did not document the price analysis in the contract file.

In addition, the Director, DPAP, and WHS, DoDHRA, DHA, and DTRA management have not issued guidance or provided training to contracting officers related to price reasonableness determinations and price analysis for orders for supplies awarded after Defense Procurement and Acquisition Policy issued the class deviation.

During the audit, we briefed the Deputy Director for Contract Policy and International Contracting, DPAP, on our findings and proposed recommendations. The Deputy Director stated that DPAP is developing a guidebook for purchasing commercial items. The guidebook will address price reasonableness determinations and price analysis for commercial items, including supplies purchased from the GSA Federal supply schedule, which are considered to be commercial items. In addition, the Deputy Director explained that DPAP officials are coordinating with the Defense Acquisition University to develop training on the requirements in the guidebook. During this meeting, we suggested that DPAP and the Defense Acquisition University should develop the training instead of each Defense organization developing its own training to ensure consistent training across the DoD. The DPAP official agreed and stated that the recommendations should be directed to DPAP instead of the Defense organizations visited during the audit.

Recommendations

We recommend that the Director, DPAP, develop and implement guidance for performing and documenting price analysis and making price reasonableness determinations for GSA Federal supply schedule orders for supplies and develop training for contracting personnel on the guidance.

Management Comments and Our Response

The Deputy Director for Contract Policy and International Contracting, DPAP, responding for the Director, DPAP, agreed with our finding and recommendations to provide guidance and develop training. The recommendations are resolved but will remain open. We will close the recommendations once we verify that DPAP has issued the guidance and developed the training.