December 16,2004

IG Report on Federal Technology Contracting Problems

M E M O R A N D U M

To: Reporters and Editors
Re: Report on Federal Technology Contracting Problems
Da: Thursday, Dec. 16, 2004

A report issued today by the Inspector General for the General Services Administration –"Compendium of Audits of the Federal Technology Service Regional Client Support Centers" –identifies a number of improper contracts and task order awards involving millions of dollars whichdid not comply with procurement laws and regulations.

The report was completed in response to a January 2004 letter from Senator Grassleyrequesting a comprehensive audit by the Office of the Inspector General of the General Services Administration's Federal Technology Service Regional Client Support Centers. Concurrently, GSAA dministrator Steven A. Perry also asked the Inspector General for a complete review of its ClientSupport Centers.

The Federal Technology Service is a subsidiary of the General Services Administration. Itprocures information technology from the private sector and resells those services to othergovernment agencies. The Federal Technology Service collects a fee for providing its contractingand procurement services which, according to the Inspector General, contributed in part to "anenvironment that emphad client agency satisfaction and a culture that emphad revenuegrowth."

An audit report of the Inspector General issued January 8, 2004, had disclosed seriousmanagement problems, procurement irregularities and contracting abuses in three of the FederalTechnology Service Regional Client Support Centers. Based on the gravity and consistent nature ofthose problems across those three offices, Senator Grassley grew concerned that similar abuses mightbe occurring in the remaining Federal Technology Service Client Support Centers. In fact, theInspector General report issued today finds that to be the case.

The Inspector General report identifies the following problems.

Some task orders that had been let for a specific dollar amount were allowed to mushroomby a factor of 30 to 50 times, without any further competition required. One sole source task orderthat was only anticipated to span a two-month period (with no option periods), grew from $203,762to more than $81 million, an increase of 39,675 percent.

In some instances, contracts were awarded to one company simply to be able to pass the workthrough to another company.

Some contractors were being asked to perform work that was not within the scope of theircontracts.

Undue restrictions were sometimes placed on competition in order to facilitate sole sourcecontracting or to be able to select a specific, preferred contractor.

Fees were being taken for project management services, although little or no managementor oversight actually was being provided. Federal Technology Service's lack of oversight resultedin payment for shoddy work, work that was never completed, or that was never delivered to thegovernment -- including some involving homeland security.

Some client agencies were even permitted to select their own vendors.

Nineteen information technology task orders were awarded for construction services, lease,or the acquisition of real property.

Some 38 task orders exceeding $571 million inappropriately used the information technology fund for such non-information technology related services as environmental clean up, administration,training on procurement and accounting of materials, and consulting and financial management activities.

Senator Grassley issued the following comment about the findings.

"It's upsetting that many of the problems identified a year ago by the Inspector General insome of the Regional Client Support Centers were found to be problems in almost every region ofthe country. It's obvious that there have been serious weaknesses in both the systems and themanagement at the General Services Administration. I appreciate Administrator Perry's swift andaggressive response to fixing the problems. He's taking the bull by the horns to make sure everycenter operates according to the laws and regulations."

The December 14, 2004 report of the Inspector General for the General ServicesAdministration will be available at http://oig.gsa.gov.

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