Report | July 28, 2014

Improvements Needed in Contract Administration of Mi-17 Cockpit Modification Task Order (Redacted)

DODIG-2014-096

Objective

Our objective was to determine whether DoD officials properly awarded and administered indefinite-delivery, indefinite-quantity contract W58RGZ-09-D-0130, Task Order 0102, for the modification of DoD-owned Mi-17 variant aircraft in accordance with Federal and DoD regulations and policies.

Findings

Army Contracting Command (ACC)-Redstone contracting officers did not properly administer Task Order 0102. A contracting officer created a prohibited cost-plus-a-percentage-of-cost type contract under the task order by incorrectly issuing a modification to increase funding for incomplete efforts that included additional fees. As a result, the contracting officer did not provide the contractor with an incentive to control costs, and the contractor received excess fees over $150,000 to perform the original contracted tasks; these fees should be recouped. (See Appendix C for details on potential monetary benefits).

The contracting officers awarded the task order and subsequent modifications without adequately evaluating and determining the reasonableness of offered prices. Contracting officers did not perform adequate cost or price analysis, relied on unsupported statements by project management office technical personnel to determine whether prices were fair and reasonable, and neglected to perform their duties in accordance with federal regulations by not evaluating price reasonableness of contractor proposals. As a result, the Army had limited assurance that it received fair and reasonable prices for Mi-17 cockpit modification services valued at $15.2 million.

The contracting officer provided consent for a sole-source subcontract without verifying that a noncompetitive award was appropriate. The contracting officer did not evaluate the contractor’s request for consent to subcontract or obtain supporting data. As a result, the Army did not obtain the benefits of competition on subcontracted services.

ACC-Redstone officials agreed to recoup fees on material costs that were incorrectly applied to modification 10 of Task Order 0102.

Recommendations

We recommend the Director, ACC-Redstone Non-Standard Rotary Wing Aircraft Directorate, take action to terminate the sixth cockpit modification, establish quality assurance procedures to verify contract files contain adequate documentation and analysis, recoup fees paid (which includes the fee ACC-Redstone has agreed to recoup) and require contracting officers to perform and document analyses of contractor requests for consent to subcontract.

Management Comments and Our Response

Comments from the Executive Director, ACC–Redstone, addressed Recommendations B.1, B.2, and C. We request additional comments on Recommendation A by August 28, 2014.