in the report, that the original justification for contract assistance from IBC was not valid in the later periods. B. The Acquisition Process The practices followed in the procurements with Frank Gomez, IBC, and INSI were contrary to proper acquisition policies and procedures and failed to meet the fundamental requirements of the Federal Acquisition Regulation (FAR). S/LPD officials abused the acquisition process and OPR/STP officials, rather than control and correct the problems, condoned and assisted in the commission of unauthorized actions. This inquiry examined seven acquisitions made by two of the organizations in the Department which have been delegated procurement authority--Deputy Assistant Secretary for Operations, Office of Supply, Transportation, and Procurement (ÕPR/STP) and the Foreign Service Institute (M/FSI). The purpose of our audit was to evaluate the adequacy of the policies, procedures and practices followed in acquiring these services. Our findings are divided into two sections. The first section addresses the acquisitions made by OPR/STP and the second section addresses the acquisition made by M/FSI. 1. Purchase Orders and Contracts Awarded by OPR/STP Our findings are based on our audit of the OPR/STP and S/LPD files, interviews with the OPR/STP contracting officials and the Department's Procurement Executive, and information from previous OIG audit reports. We found that a. Purchase Orders and Contracts were Placed After work Sole Source Acquisitions Were Not Justified; Acquisitions Were Not Publicized in the Commerce Acquisitions Were Apparently split to Circumvent OPR/STP Contracting Officials Did Not Perform Adequate Purchase Orders and Contracts were Placed After Work The S/LPD program officials assumed the duties of the OPR/STP contracting officials by obtaining the services of Mr. Gomez, IBC, and INSI without following proper acquisition policies and procedures. Once S/LPD program officials had arranged for the services and settled the substantive issues - 10 involved in the acquisition process, they turned the work over to the OPR/STP contracting officials to process the paperwork needed to pay for the services. OPR/STP contracting officials assembled acquisition documents and signed them to cover unauthorized commitments made by S/LPD program officials. Despite the fact that these methods of conducting the Government's acquisition affairs were contrary to the acquisition regulations, the OPR/STP contracting officials did not challenge the S/LPD actions as unauthorized commitments. The For example, Purchase Order No. 1001-502074 was signed on January 28, 1985, by the OPR/STP contracting official; almost. one month after IBC was to have completed the work and almost four months after IBC had been directed to begin the work by S/LPD officials. The order was awarded to IBC for $24,400. proposal from IBC was submitted to S/LPD officials based on their discussions with Mr. Gomez. If done correctly, proposals from any and all sources should have been obtained by OPR/STP contracting officials through the prescribed acquisition procedures. However, S/LPD officials assumed the role of the OPR/STP contracting officials for this portion of the acquisition process. Next, the S/LPD officials directed IBC to perform the work without contracting officer authority and created an unauthorized commitment. This purchase order was illustrative of the other orders and contracts awarded to Mr. Gomez and IBC. The FAR prescribes the acquisition process to ensure that the interests of the United States are safeguarded and that contractors doing business with the Government receive impartial, fair, and equitable treatment (FAR 1.602-2). The FAR clearly states that contracting officers are responsible for the control of the acquisition process and that contracts may be entered into and signed on behalf of the Government only by contracting officers. FAR 1.602 (b) provides that no contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met. We believe that additional measures must be taken by the Department's senior managers to strengthen the acquisition process and to ensure stricter enforcement of the provisions of the acquisition regulations. (Recommendation 1). Moreover, by separate correspondence, we are referring a copy of this report to the Director General of the Foreign Service and Director of Personnel (M/DGP) with a recommendation that disciplinary action be considered against personnel who were responsible for violating the acquisition regulations and for directing and managing the acquisitions from Mr. Gomez, IBC, and INSI. b. Sole Source Acquisitions Were Not Justified All purchase orders and contracts awarded by the OPR/STP contracting officials to Mr. Gomez, IBC, and INSI were based on - 11 inadequate sole source justifications. The documents furnished by the S/LPD program officials as justifications did not meet the requirements of acquisition regulations, but were merely capability statements. The OPR/STP contracting officials did not challenge the adequacy of the justifications. They simply accepted the documentation and did not seek free and open competition. For example, Purchase Order No. 1001-402214 was the initial order with Mr. Gomez placed in February 1984 on a sole source basis by OPR/STP contracting officials. S/LPD's request included a document titled sole source justification. The document was merely a description of Mr. Gomez's background and capability, however. It did not demonstrate that he was the only source that could provide the services required by S/LPD. Once this document was accepted without question by the OPR/STP officials, the die was cast. During the work of the initial order, S/LPD officials began negotiating with Mr. Gomez for the next purchase order. They used essentially the same Justification for the next purchase request they prepared for Mr. Gomez's services. Using the inadequate justification, the OPR/STP contracting officials placed the second order (1001-402296) with Mr. Gomez in July 1984. In the final contract with IBC another feature of contracting was added--the Competition in Contracting Act of 1984 (CICA). At the time this contract was being considered by S/LPD officials, the FAR had been changed to include the CICA provisions. OPR/STP contracting officials brought the new FAR provisions to S/LPD's attention; including the requirements to publicize even proposed sole source awards and seek competition to the maximum practicable extent even in cases of urgency. This contract was classified SECRET by S/LPD officials, not publicized by OPR/STP officials, and was eventually awarded on a sole source basis some 11 months after IBC began the work at S/LPD's direction. This final contract with IBC included the addition of a new requirement, on a sole source basis, for the design and operation of S/LPD's distribution system. The distribution system services were not included in the media relations services that S/LPD had been obtaining from IBC during the period of February 1984 through September 1985. Nonetheless, S/LPD officials proposed IBC as a sole source for these seemingly ordinary services. We believe that additional measures are needed to improve OPR/STP's compliance with the competition requirements in the Federal Acquisition Regulation. Moreover, we believe that any instructions prepared to address improvements in compliance with the competition requirements should be furnished to all the Department's acquisition offices. (Recommendation 2). C. · - 12 Acquisitions Were Not Publicized in the Commerce OPR/STP contracting officials did not comply with the requirements of the acquisition regulations on publicizing proposed contracts in the CBD. None of the purchase orders or contracts over $10,000 awarded to Mr. Gomez or IBC were publicized by OPR/STP contracting officials and this noncompliance was encouraged by the S/LPD program officials. Some of the acquisitions were made during the time the Federal Procurement Regulations (FPR) were in effect (through March 31, 1984) and other acquisitions were made under the present regulations, the FAR. The FPR and the FAR both contained specific requirements for synopsizing proposed contracts over $10,000. Based on evidence in the files, the only acquisition which was considered for CBD publication was contract 1001-602066. This contract was for IBC services for FY 1986 and was awarded through the ratification process some 11 months after IBC was directed by S/LPD officials to begin the work without a contract. It was awarded in the not-to-exceed amount of $276,186 and contained the new requirement for IBC services related to the design and operation of the S/LPD distribution system. The S/LPD request for FY 1986 services from IBC was prepared the day before the contracting officials sent the new CICA guidance to the S/LPD officials. The S/LPD request contained the same justification for not publicizing the requirement as the first contract with IBC: "... the services and contractual arrangements of which are not to be disclosed publicly because of their character, ingredients, and components." The OPR/STP contracting officials cited the revised FAR and stated that the previous basis for not disclosing work with IBC was no longer acceptable because the FAR required publication in the CBD of proposed sole source awards and competition, to the maximum practical extent, for even those requirements that were determined to be urgent. After interaction between various Department staffs, a decision was made by S/LPD officials to have the contract and the entire contract file classified SECRET for "national security reasons." This action caused a series of delays in the acquisition process. The OPR/STP contracting officials were aware of the requirement that S/LPD had for FY 1986 services in late September 1985, but did not act to publicize the requirements in the CBD. The negotiation summary in the contract file prepared by OPR/STP officials and dated August 26, 1986, stated: "The procurement was not synopsized in the Commerce Business Daily (CBD) due to the highly sensitive nature of the services, and the fact that S/LPD did not want the requirement to become public knowledge." [emphasis added.] In the same files, in the Justification for other than full and open competition, dated April 3, 1986, the OPR/STP officials cited FAR 6.302-6, - 13 "National Security," as the basis for not providing for full and open competition. That justification went on to state: "FAR Chapter 5.202 provides an exception to synopsizing a procurement in the Commerce Business Daily (CBD) if disclosure of the Agency's needs would compromise the national security. In the case of this contract, the contractor will be performing services that fall within that criterion." In our opinion, the reason cited by the OPR/STP contracting official for not synopsizing the proposed contract did not adequately address the FAR requirements. FAR 5.202(a)(1) states that the contracting officer need not submit the notice to the CBD when the contracting officer determines that "The synopsis cannot be worded to preclude disclosure of an agency's needs and such disclosure would compromise national security (e.g., would result in disclosure of classified information)." The fact that a proposed solicitation or contract action contains classified information, or that access to classified matter may be necessary to submit a proposal or perform the contract does not, in itself, justify use of this exception to synopsis. We believe the Department should issue additional instructions on the requirements for CBD synopsis. (Recommendation 3). d. Acquisitions Were Apparently Split to Circumvent Purchase orders with Mr. Gomez and IBC were made on a fragmented basis apparently to circumvent the acquisition requirements. The first three purchase orders were based on split requirements prepared by S/LPD program officials for periods of performance of a few months and at dollar levels below $10,000, the threshold for small purchases in effect when these orders were awarded. The final S/LPD request for a small purchase award to IBC was under $25,000, the small purchase threshold in effect at the time that order was awarded. S/LPD program officials knew they were going to continue to use Mr. Gomez's services for an extended period of time because while he was working under a purchase order or contract, S/LPD was negotiating with him for the next purchase order or contract. OPR/STP contracting officials were aware of these S/LPD actions because the S/LPD requisition documents referred to extensions of previous orders or continuation of previous services. However, the OPR/STP contracting officials did not attempt to stop these practices. We believe that additional measures are needed to bring the small purchasing operations into compliance with PART 13 of the FAR. (Recommendation 4). e. OPR/STP Contracting Officials Did Not Perform Adequate Contract Administration |