FDIC's Use of Consultants
January 18, 2005
Evaluation Report 05-003
To: Stephen M. Beard
Deputy Assistant Inspector General for Audits
From: Arleas Upton Kea, Director
Division of Administration
Subject: Draft Report Entitled FDIC's Use of Consultants (Assignment No. 2004-029)
The Division of Administration (DOA) has completed its review of the subject Office of Inspector General (OIG) report. In the report, the OIG made three recommendations for improvement; two of the recommendations addressed deficiencies noted in the administration of specific contracts while one recommendation was made to strengthen the controls over the FDIC's use of consultants. We have evaluated the OIG's recommendations and have provided a detailed response to include the planned corrective actions and expected completion dates as appropriate.
MANAGEMENT DECISION
Finding 1: Adequacy of Justification for Consulting Contracts
Condition 1: The FDIC's contract for its diversity advisor was modified in March 2004, to extend the period of performance through March 2005. However, the diversity advisor has been unable to perform any coaching or mentoring services under the contract since December 2003 due to an extended illness.
Recommendation 1: We recommend that the Director, DOA, reevaluate the continuation of the diversity consultant contract.
Management Response: DOA partially concurs. DOA discussed the OIG recommendation to reevaluate the continuation of the diversity consultant contract with ODEO management. ODEO stated that the diversity advisor has recovered from his recent illness and is currently planning to return to the FDIC in the next several weeks to perform additional coaching/mentoring services outlined under the contract. Therefore, the contract will remain in place through the March 2005 expiration date. If for any reason, the consultant is unable to perform duties required in the contract, DOA will re-open this condition.
Finding 2: Adequacy of Acquisition Planning and Management for Consulting Contracts
Condition 2: The service costing (benchmarking) contract is an active contract with important work yet to be completed to assist the FDIC in implementing its service costing methodology. Specific work is assigned to the consultant through the use of individual task orders. However, the total contract price, according to the executed copies of the task orders found in the official contract file as well as in the OM's contract file, is not the same as the total contract price reported in the FDIC's purchase order system (POS). As a result, we could not verify the total contract price, or determine the contract terms, including the work requirements and/or specified price for the missing task orders and modification. We concluded that more attention needs to be given to the service costing (benchmarking) contract.
Recommendation 2: We recommend that the Director, DOA, require the CO for the service costing (benchmarking) contract to complete a full contract review, including a reconciliation of the contract price and all individual task orders awarded under this contract to the POS.
Management Response: DOA agrees with the OIG recommendation. The cognizant Contracting Officer (CO) has been instructed to perform a full contract review that would include a reconciliation of the contract price with all individual task orders executed under the contract. ASB expects to complete this review by February 28, 2005.
Finding 3: Enhanced Controls are Warranted
Condition 3: consulting contracts present risks to the FDIC because they may closely relate to functions that should be performed by FDIC management and because of the potential for conflict of interest situations. Although nothing came to our attention that caused us to suspect abuse, consulting contracts are sensitive in nature and the dollar amount of these contracts can often fall below the dollar threshold requiring a written acquisition plan. We concluded that management controls could be strengthened to protect the FDIC from these risks.
Recommendation 3: We recommend that the Director, DOA, revise the APM to raise awareness of the risks associated with consulting contracts and enhance controls to ensure that the FDIC is protected from the improper use of consultants.
Management Response: DOA partially concurs with the OIG recommendation. Although we agree that there are potential risks with consulting contracts as defined by the OIG, we do not believe these risks are significantly greater than other service type contracts that FDIC engages. DOA believes that the current APM provides sufficient guidance and controls to mitigate the inherent risks associated with service type contracts. However, we do believe that due to the unique nature of consulting contracts, the awareness of these contract vehicles can be raised via training and other formal written reminders to acquisition personnel. In addition, ASB had already begun to work with the FDIC Contract Legal Unit (CLU) to strengthen conflict of interest provisions associated with consulting contracts. ASB expects to complete these actions by March 31, 2005.
If you have questions regarding the response, our point of contact for this matter is Andrew Nickle, Audit Liaison for the Division of Administration. Mr. Nickle can be reached at (202) 942-3190.
cc: James H. Angel, Jr., OERM
Glen Bjorklund, DOA
Ann Bridges Steely, DOA ASB
Michael D. Collins, ODEO
Stephen M. Hanas, Legal
Paul K. Sherman, DOA MSB