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Audit of Contractor Employee Qualifications for Defense Health Agency-Funded Information Technology Contracts (DODIG-2020-091)

Audit

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Publicly Released: June 17, 2020

 

Objective

The objective of this audit was to determine whether contractor employees met the labor qualifications for Defense Health Agency (DHA) information technology (IT) and telecommunications contracts. See Appendix A for a discussion of the scope and methodology and prior audit coverage related to the objective.

Background

On December 21, 2018, the DoD Office of Inspector General received an allegation to the DoD Hotline that the contracting officer’s representative (COR) for a DHA‑funded IT service contract approved invoices for unqualified contractors. We were unable to determine whether the COR approved invoices for contractor employees who did not meet the minimum education or experience requirements because the contract identified in the complaint did not specify the minimum information assurance workforce requirements. Specifically, the contracting office did not follow DoD guidance that required the contract to specify the contractor category, level, and certification requirements. However, we reviewed other DHA‑funded IT service contracts and determined whether employees met minimum contract requirements.

The DHA IT contracting office awards and administers contracts in support of health care‑related IT services. However, when the DHA lacks in‑house capacity to award a contract, it may outsource contracting for IT requirements to contracting offices, such as the U.S. Army Medical Research Acquisition Activity (USAMRAA) or other Government agencies. In other instances, the DHA may choose to outsource its IT requirements to agencies with in‑house IT service capabilities, such as the Naval Information Warfare Center (NIWC) Atlantic. The NIWC Atlantic can then award contracts to supplement its in‑house IT service capabilities.

Contracts can require that the labor categories for key and non‑key personnel have minimum education, certification, and work experience requirements. Key personnel are essential to contract performance and must be approved by the contracting officer or COR. Key personnel positions can vary by contract and may include positions such as project managers, subject‑matter experts, and program managers. Non‑key personnel are necessary to complete the requirements of the contract but may be replaced without contracting officer or COR approval.

From April 2018 to March 2019, DoD contracting officers awarded 1,031 contracts, task orders, or modifications with award values totaling $1 billion, for DHA‑funded IT and telecommunications services. We reviewed a nonstatistical sample of nine contracts awarded by USAMRAA, NIWC Atlantic, and DHA contracting offices, with award values totaling $155.1 million. We reviewed 383 key and non‑key personnel from the contracts we selected.

 

Finding

We determined that 76 of 383 contractor employees we reviewed did not meet minimum labor qualifications required by DHA IT and telecommunications contracts. Specifically, DHA and NIWC Atlantic contracting officers approved 16 key personnel and contractors approved 60 non‑key personnel who did not meet minimum labor qualifications. This occurred because the DHA and NIWC Atlantic contracting offices did not oversee reviews of key personnel performed by contracting officers, and did not review non‑key personnel approved by the contractors.

In addition, the DHA contracting office could not demonstrate whether an additional 143 contractor employees met the minimum labor qualifications because the contracting office and contractor did not provide employee résumés to the audit team. This occurred because although the contract contained the appropriate Federal Acquisition Regulation clause requiring contractors to retain documentation, the contractor did not retain all employee résumés or certifications after the contract ended.

Finally, an additional four contractor employees may not have been qualified for key personnel positions in USAMRAA contract 0070 because the contracting officer did not make the minimum requirements specific enough for the audit team to determine whether the contractor employees were qualified for the key personnel positions. This occurred because the USAMRAA contracting office did not follow DoD guidance that required contracting officers to specify contractor category, level, and certification requirements in IT service contracts.

DHA, NIWC Atlantic, and USAMRAA contracting officers included labor categories and, often, minimum labor qualifications in their DHA‑funded IT service contracts. The labor categories or minimum qualifications may have been necessary to meet the DHA’s IT needs; however, Federal and DoD guidance discourage contracting officers from including labor categories and minimum labor qualifications to allow better contractor competition and allow contractors to propose the best qualified people. Although we identified 76 contractor employees who did not meet minimum labor qualifications, the CORs and contractor performance assessment reports did not note any problems with contractor performance or the DHA IT services provided.

As a result, the DHA and NIWC Atlantic contracting officers authorized approximately $3.52 million in questioned costs, between April 2018 and March 2019, for work performed by the 76 contractor employees who did not meet minimum qualifications. Furthermore, a DHA contracting officer may have authorized an additional $5.3 million in questionable costs for 143 contractor employees whom we did not review because the contracting office did not provide résumés. We did not quantify potential improper payments for the four contractor employees that did not have specific requirements in the USAMRAA contract because the employees worked on a firm‑fixed‑price contract, which is paid based on contract deliverables and not based on individuals working on the contract. We identified a total of $8.81 million in questioned costs. See Appendix B for potential monetary benefits.

Overall, contractor employees who did not have the required education or years of work experience were paid for IT services that support health‑care delivery to over 9 million beneficiaries. While no performance or service problems were documented for the contracts we reviewed, having unqualified contractor employees on IT service contracts could disrupt health care for service members and their beneficiaries.

 

Recommendations

We made several recommendations to address our finding, including the recommendation that the contracting offices develop policy requiring the contracting officers to revalidate all key personnel annually, as well as review a sample of non‑key personnel quarterly, to reduce the potential of improper payments. In addition, the contracting offices should develop an oversight program, requiring a higher‑level reviewer to select a sample of key personnel approvals to ensure contracting officers are approving employees in accordance with contract requirements. Furthermore, we recommend that the contracting officers maintain documentation in the contract files that demonstrates their review and approval of initial and replacement contractor employees in key personnel positions.

Additionally, we recommend that the appropriate contracting officers or technical experts determine whether the contractor employees referenced in this report met the minimum labor qualifications specified in the contracts, and, if not, take appropriate corrective action, including recovering improper payments.

 

Management Comments and Our Response

The DHA Director agreed with all nine DHA recommendations, stating that the DHA has developed corrective action plans to address the recommendations. The Director plans to implement all the corrective action plans no later than December 31, 2020. The Director’s comments resolve eight of the nine recommendations, but the recommendations will remain open. For the unresolved recommendation, the DHA Director agreed with the recommendation to develop policy for IT service contracts to require contracting officers to include a requirement in the quality assurance surveillance plan to review a sample of non‑key personnel to determine whether the contractor personnel meet the labor categories specified in the contract. However, the Director’s comments do not address quarterly reviews of non‑key personnel.

The Procurement Insight Oversight Director in the Office of the Deputy Assistant Secretary of the Army (Procurement), responding for the USAMRAA Director, agreed with all three USAMRAA recommendations, stating that the USAMRAA plans to complete its corrective actions by August 31, 2020. The Procurement Insight Oversight Director’s comments resolve two of the three recommendations, but the recommendations will remain open. For the unresolved recommendation, the Procurement Insight Oversight Director agreed with the recommendation to develop policy that requires contracting officers to maintain documentation in the contract files that demonstrates their review and approval of initial and replacement contractor employees in key personnel positions. However, the corrective action to remind contracting officers of the Defense Federal Acquisition Regulation Supplement guidance for task orders issued under multiple‑award indefinite‑delivery indefinite‑quantity service contracts would not adequately ensure that contracting officers are maintaining documentation for key personnel reviews and approvals for all contract types awarded by USAMRAA.

The Naval Information Warfare Systems Command Executive Director, responding for the NIWC Atlantic Executive Director, provided comments that resolved seven of the eight recommendations, but the recommendations will remain open. The Executive Director plans to complete the corrective actions by December 31, 2020. For the unresolved recommendation, the NIWC Atlantic Executive Director agreed with the recommendation to include an oversight program requiring a higher‑level reviewer to sample key personnel approvals by including it as an item for evaluation in the FY 2021 Command Evaluation Plan; however, the Executive Director’s comments do not adequately ensure implementation of an ongoing oversight program. We request that the DHA Director, the USAMRAA Director, and the NIWC Atlantic Executive Director provide additional comments on the final report.

 

This report is the result of Proj. No. D2019‑D000AW‑0180.000.