The General Services Administration (GSA)’s Office of Inspector General (OIG) published a report on March 21, 2017, titled “Audit of Price Evaluations and Negotiations for the Professional Services Schedule Contracts.” According to the IG audit, GSA’s process to consolidate eight pre-existing schedules into the Professional Services Schedule (PSS) resulted in the award of new contracts without establishing price reasonableness. Contracting officers also used a combined “Pre and Price Negotiation Memorandum” template that does not conform to Federal Acquisition Regulations (FAR) and Federal Acquisition Service (FAS) policy. Finally, contract files lack sufficient documentation to determine fair and reasonable pricing. In February 2017, GSA’s FAS initiated price reevaluations for all 322 migrated contracts to ensure prices awarded were fair and reasonable.
Every year, GSA’s Office of Inspector General (OIG) selects around 50 GSA Schedule contracts for the ultimate compliance test –a pre-award audit. The stakes in an OIG audit are high, so proactive contractors should consider when a pre-award audit is likely to occur, what comprises the audit process, and what auditors look for as a critical component of their compliance program planning.
Not following the terms and conditions of your GSA Schedule Contract can cost you big $$$!
Scenario One: You receive an RFQ from a Federal Government procuring agency that will utilize your GSA Schedule contract on a re-compete for work your company is already performing for this customer. The RFQ lists the labor category title, education and experience requirements for the work, including a Senior Network Engineer that requires a Bachelor’s Degree and 10 years’ experience. Your Senior Network Engineer GSA labor category requires a Bachelor’s Degree and 8 years’ experience, but the person you are proposing in the category is familiar with the work being performed at the agency. The agency’s personnel are familiar with this resource and like the work that she has done in the past. The agency personnel say, it’s fine if you use your person with 8 years’ experience as a substitute for our agency requirement of a person with 10 years’ experience. It sounds harmless enough. The agency has agreed, so you’re in the clear, right? Wrong!
When clients are notified they are being audited by the GSA Office of Inspector General (OIG), their first question is often what they did wrong. In reality, being selected for an audit is frequently an indication that a company is doing something right – at least as far as sales volume is concerned.
GSA’s OIG only does 40-50 pre-award audits annually and generally selects contracts that fall in the top 5% of sales for the Schedule. When only a small sample can be audited, the OIG will choose contracts that offer the most “bang for the buck” in terms of potential recoveries. In FY13, the OIG conducted 51 pre-award audits, but those contracts accounted for over 20% of total schedule revenues.
Companies with more modest sales shouldn’t take the unlikelihood of an audit as an invitation to stick their heads in the sand regarding compliance. All schedule holders should pay attention to the major findings from OIG audits, as recurring problems frequently become the basis for “trickle down” compliance efforts across the schedules program.
In its Semiannual Report to the Congress for the period from April 1, 2015 to September 30, 2015, GSA’s Office of Inspector General (OIG) warns the agency faces major challenges in pricing and contractor compliance within the Schedules Program. The OIG reached this conclusion based, in part, on the results of the 30 GSA Schedule pre-award audits performed during the reporting period on contracts with an estimated value in excess of $3.1B. Of the total estimated value, the OIG recommended that $195M be put to better use.
The GSA Schedule contracts continue to generate significant sales and the OIG cites commercial sales practice disclosures and Price Reductions Clause monitoring as significant risk areas. Recently, OIG auditors have also focused their attention on labor categories and ensuring that contractors are fulfilling tasks orders with personnel who meet the qualifications stated on their GSA Contract. Significant findings in the audits from this period included (1) commercial sales practices information that was not current, accurate or complete; (2) proposed labor rates that were overstated; (3) ineffective Price Reductions Clause compliance monitoring; and (4) the use of unqualified labor.