Report | Dec. 7, 2016

Fleet Logistics Center Norfolk Price Reasonableness Determinations for Federal Supply Schedule Orders for Supplies Need Improvement DODIG-2017-031

Objective

We determined whether Navy contracting officers made determinations of fair and reasonable pricing for General Services Administration (GSA) Federal supply schedule orders awarded for purchases of supplies. The Federal supply schedule program allows the Government to purchase commercial supplies and services at prices associated with volume buying. We reviewed a nonstatistical sample of 35 orders, valued at $28.8 million, at the U.S. Naval Supply Systems Command Fleet Logistics Center (FLC) Norfolk. This is the second in a series of audits on GSA Federal supply schedule orders.

Finding

FLC Norfolk contracting personnel made adequate price reasonableness determinations for 14 orders, valued at $7.8 million, of 35 orders, valued at $28.8 million. Specifically, contracting personnel compared the prices from two quotes for six orders, valued at $1.6 million, and compared single quotes to specific historical and market research information for eight orders, valued at $6.2 million. Contracting personnel also documented that the prices paid for the 14 orders were fair and reasonable.

However, contracting personnel did not adequately document and support whether the prices paid for 21 orders,1 valued at $21 million, were fair and reasonable. Specifically:

  • For 16 orders, contracting personnel relied on vendor price lists and blanket purchase agreement price lists of the same vendor that submitted the only quote. Contracting personnel stated that the GSA vendor was the only authorized reseller of the supplies purchased or the only source capable of providing the supplies, and that the GSA had already determined that Federal supply schedule price lists were fair and reasonable. In addition, the Navy contracting officer who awarded the blanket purchase agreements had already determined that the prices were fair and reasonable, and performing price analysis for orders awarded under blanket purchase agreements would not be productive because contracting personnel were required to use the blanket purchase agreements for the type of supplies purchased. However, DoD guidance2 requires DoD contracting officers to make determinations of fair and reasonable pricing for GSA Federal supply schedule orders.
  • For 4 orders, contracting personnel relied on historical information that was not specifically identified. Contracting personnel stated that this was an oversight.
  • For 6 orders, contracting personnel relied on inadequate independent Government estimates that did not identify the sources of the information as required by a Defense Procurement and Acquisition Policy memorandum. This occurred because contracting personnel relied on the expertise of the preparers of the independent Government estimate rather than requesting the preparers to document and support the basis of the estimate.
  • For 8 orders, contracting personnel did not document whether the prices paid were fair and reasonable as required by the Federal Acquisition Regulation and the class deviation from the Federal Acquisition Regulation, that requires contracting personnel to make determinations of fair and reasonable pricing for GSA Federal supply schedule orders for supplies and fixed-price services. Contracting personnel stated that this was an oversight.

In addition, FLC Norfolk did not have standard operating procedures for making price reasonableness determinations and performing price analysis for orders of supplies. As a result, FLC Norfolk customers may have paid more than they should have for the supplies purchased.

Recommendation

We recommend that the Commander, FLC Norfolk, develop and implement standard operating procedures for making price reasonableness determinations and performing price analysis for GSA Federal supply schedule orders for supplies and train contracting personnel on the procedures.

Management Comments and Our Response

The Commander, FLC Norfolk, addressed all specifics of the recommendations, and no further comments are required.

1 Each of the 21 orders had one or more of the identified problems.

2 Director, Defense Procurement and Acquisition Policy, memorandum, “Class Deviation–Determination of Fair and Reasonable Prices When Using Federal Supply Schedule Contracts,” March 13, 2014.

This report is a result of Project No. D2016-D000CF-0102.000.