Objective:
We determined whether the Defense Contract Management Agency (DCMA) properly awarded and administered information technology (IT) service contracts.
We conducted this audit in response to a management request from the former DCMA Director. Specifically, the Director noted irregularities with DCMA Procurement Center IT contracts, including requirements definitions and the contract award process, and asked us to audit Procurement Center IT contracts.
Background:
The DCMA performs contract administration services for the DoD, other authorized Federal agencies, foreign governments, and international organizations. DCMA IT Directorate program managers, contracting officer’s representatives (CORs), contract specialists, and DCMA Procurement Center contracting officers are involved with awarding and administering DCMA IT service contracts.
We reviewed a nonstatistical sample of 14 DCMA IT service contracts, valued at $72 million, from a universe of 94 IT service contracts that were active in FY 2017. The contracts we reviewed included firm-fixed-price contracts and orders issued under blanket purchase agreements or flexible ordering agreements.
Finding:
We determined that DCMA contracting officials did not properly award 11 of the 14 IT service contracts reviewed, valued at $61 million. Specifically, DCMA officials did not:
- properly define requirements that included measurable performance standards for eight contracts;
- develop an acquisition plan for one contract; or
- submit offers for Small Business Administration acceptances for two contracts awarded through the 8(a) program.
In addition, DCMA officials used flexible ordering agreements to award 5 of the 14 contracts, which violated relevant Federal Acquisition Regulation requirements.
These problems occurred because DCMA officials did not ensure that contracts were developed in accordance with Federal Acquisition Regulation and DCMA guidance, use multi-functional teams to plan and manage IT service requirements, and perform pre- or post-award peer reviews of contracts.
As a result, DCMA contracting officials acquired $56.4 million in IT services on contracts with poorly defined or nonexistent performance work statements that may not meet the performance needs required to successfully execute the DCMA mission. Additionally, DCMA contracting officials fulfilled IT services requirements under the 8(a) Business Development Program without the Small Business Administration determining whether the requirements should continue under the 8(a) program. Furthermore, DCMA contracting officers exceeded their authority by establishing flexible ordering agreements and did not comply with Federal competition guidelines.
In addition, DCMA contracting officials did not properly administer IT service contracts for 13 of the 14 contracts, valued at $70.3 million. Specifically, DCMA officials did not properly monitor contractor performance, accept IT services, approve invoices or use the Defense Contract Audit Agency to approve interim invoices with labor-hour line items. This occurred because DCMA officials did not:
- appoint CORs for 3 of the 13 contracts;
- terminate CORs for 6 of the 13 contracts;
- properly train the CORs for 10 of the 13 contracts;
- develop quality assurance surveillance plans for 7 of the 13 contracts; and
- develop adequate quality assurance surveillance plans for 4 of the 13 contracts.
Furthermore, DCMA officials who accepted IT services and approved invoices did not have the authority to do so and did not maintain discipline, structure, and a work environment that encouraged establishing and implementing effective internal controls.
As a result, DCMA officials do not have reasonable assurance that the DCMA received the $70.3 million in IT services it paid for. Without adequate contractor surveillance, the DCMA might receive services that are late, deficient, or outside the scope of the contract requirements. Finally, if DCMA officials do not improve the controls to ensure effective contract administration, the DCMA IT Directorate will continue to pay for IT services without reasonable assurance that it received the services.
Recommendations:
- Among other recommendations, we recommended the DCMA Director establish internal controls to ensure:
- DCMA officials develop performance work statements for service acquisitions;
- CORs or contracting officers perform inspections and monitor contractor performance on service contracts;
- CORs or contracting officers determine whether the contractor performed satisfactorily and ensure the work progressed according to the contract before they approve invoices;
- CORs are nominated, appointed, and terminated and that contracting officers provide CORs with contract-specific training; and
- requiring activities develop quality assurance surveillance plans for all service acquisitions.
In addition, we recommended the DCMA Director:
- develop guidance for awarding contracts under the Small Business Administration’s 8(a) program to include notifying the Small Business Administration of DCMA contracting officers’ plans to award all orders under blanket purchase agreements under the 8(a) program;
- issue written justification and approvals for all ongoing orders under flexible ordering agreements and immediately identify the mission-critical requirements met through flexible ordering agreements and award new contracts before the current periods of performance end;
- initiate a review of the contracting officers’ actions to continue the use of flexible ordering agreements, despite the Government Accountability Office’s decision and, as appropriate, initiate administrative actions; and
- reemphasize the importance of all aspects of the contracting process, and provide training for DCMA officials responsible for contract monitoring and the administration of service contracts.
Management Comments and Our Response:
The DCMA Director provided comments in response to a draft of this report.
The Director agreed with and identified corrective actions for all recommendations. Therefore, the following recommendations are resolved but remain open. We will close the recommendations once we verify that the DCMA Director has, among other requirements:
- developed internal controls to ensure that DCMA officials develop performance work statements for service acquisitions, that CORs or contracting officers perform inspections and monitor contractor performance on service contracts, and that the contracting officers or CORs determine whether the contractors performed satisfactorily and ensure the work progressed according to the contracts before approving invoices;
- developed guidance for awarding contracts under the Small Business Administration’s 8(a) program to include notifying the regional Small Business Administration of DCMA contracting officers’ plans to award all orders under blanket purchase agreements under the 8(a) program;
- identified the mission-critical requirements met through flexible ordering agreements and awarded new contracts before the current periods of performance end;
- confirmed that the DCMA review of the contracting officers' actions to continue the use of flexible ordering agreements, and stopped establishing flexible ordering agreements; and
- reemphasized the importance of all aspects of the contracting process, and provided training for DCMA officials.
This report is a result of Project No. D2017-D000CI-0140.000.