What We Did:
The objective of this audit was to determine whether the DoD made purchases through Federal Mall (FedMall) in accordance with Federal and DoD policies. To answer this objective, we focused our audit on whether the DoD paid prices for FedMall purchases that were comparable with other commercially available prices for the same items. Additionally, we reviewed whether activities had documentation supporting a requirement or need before making a purchase on FedMall.
What We Found:
We reviewed 157 items that eight activities purchased on FedMall and found that vendors added items to their FedMall catalogs and increased prices without DCSO approval. Specifically, activities purchased 13 items that vendors added to FedMall without approval from DCSO officials, and activities purchased 12 items at prices that DCSO officials never approved. This occurred because DLA program and contracting officials did not establish proper controls over vendor catalogs in FedMall. Before December 2021, vendors were able to make changes to their FedMall catalogs without any contracting office approval. During our audit, DLA program officials implemented a system update that requires contracting officer approval for vendor catalog submissions and catalog updates.
In addition, DoD activities purchased items on FedMall at prices that were higher than other commercial sources. Activities purchased 52 items at prices that were up to 533 percent higher than prices available outside of FedMall. Activities paid higher prices because DCSO officials made price reasonableness determinations based on vendors’ proposed catalog prices and discounts offered instead of other commercially available prices for the same items. In addition, DCSO officials expected that purchasers would conduct price comparisons before placing an order on FedMall; however, FedMall program officials did not communicate this requirement to purchasers.
Army activities used MILSTRIP to purchase 79 items, valued at $852,158, in violation of Army policies, which do not permit the use of MILSTRIP as a payment method for FedMall purchases. Additionally, while the Navy and Air Force activities had documentation to support requirements for FedMall purchases, the Army activities did not. Specifically, the 407th Brigade Support Battalion and the 1st Battalion, 9th Field Artillery Regiment (1-9 Field Artillery Battalion) could not provide documentation supporting a valid requirement for 45 and 34 items purchased, respectively. This occurred because Army activity officials were unaware of the regulation prohibiting the use of MILSTRIP for FedMall purchases and did not know that activities made purchases. Additionally, Army officials did not have a process to identify FedMall purchases funded through MILSTRIP.
We identified $367,081 in questioned costs related to vendors that increased prices without DCSO approval, in violation of contract terms. We identified an additional $851,290 in questioned costs related to two Army activities we reviewed that made FedMall purchases that violated Army policy. Additionally, we found that the Army made $23.1 million in additional FedMall purchases in FY 2020 with prohibited MILSTRIP
payments, which were not included in our sample review. Therefore, we identified an additional $23.1 million in questioned costs for Army FedMall purchases in FY 2020. Finally, we identified $603,335 of wasted funds for items where we found lower prices from sources outside of FedMall.
What We Recommend:
We recommend that the DCSO Director:
• identify and take appropriate action against any FedMall vendors that violated contract terms by adding items or increasing prices without approval;
• initiate action to recover the $367,081 in questioned costs from five FedMall vendors that increased prices without approval; and
• direct contracting officials to prioritize competitive price comparisons in their price analysis and price reasonableness determinations.
We recommend that the DLA Director direct the FedMall Program Manager to update FedMall user guides and training to instruct ordering activities to compare prices from three vendors and place orders with the vendor that provides the best value.
We recommend that Deputy Chief of Staff of the Army, G4, develop and implement guidance for making purchases on FedMall, including review and approval by the ordering activity commander and documenting a need for purchase. Additionally, we recommend that the Deputy Chief of Staff, in coordination with Army ordering commands, review FY 2020 Army FedMall requisitions, valued at $23.1 million, and determine whether a valid need existed for the items purchased and whether the purchases violated Army policy.
We recommend that the Commanding General of the U.S. Army Forces Command establish and implement procedures to identify, monitor, track, and review transactions made outside of the Global Combat Support System, the Army’s primary system for ordering supplies and equipment.