Search | Accessibility | Privacy | Information Quality | Plain Writing Act of 2010 | Contact Us | Site Map | Home

Contract Solicitation and Evaluation

August 2005
Audit Report 05-029


DATE: August 04, 2005
 
MEMORANDUM TO: Stephen M. Beard
Deputy Assistant Inspector General for Audits
 
FROM: Arleas Upton Kea, Director
Division of Administration
 
SUBJECT: Draft Report Entitled, Contract Solicitation and Evaluation
(Assignment Number 2004-065)

The Division of Administration (DOA) has completed its review of the subject Office of Inspector General (OIG) report. DOA appreciates the OIG for its acknowledgement that the DOA Acquisition Services Branch (ASB) generally complied with the Acquisition Policy Manual’s (APM) solicitation and evaluation requirements and achieved adequate price competition for the purpose of obtaining fair and reasonable prices. Although the OIG found general compliance, the OIG did report one recommendation that pertained to orders placed against the General Services Administration’s (GSA) Multiple Award Schedule (MAS) contracts. We have evaluated the finding and have provided a detailed response to the recommendation made.

MANAGEMENT DECISION

Finding:   Requesting Price Reductions on GSA MAS Contracts

Condition:  The FDIC requested price reductions on only one of the seven contracts in our sample that had been awarded through the GSA’s MAS program and that exceeded the MAS maximum order threshold. APM guidance does not require that price reductions be routinely requested from a MAS contractor on orders exceeding the maximum order threshold. Consequently, the FDIC may not be taking full advantage of additional discounts that may be offered as a result of competition, technological changes, and other factors in the commercial market place.

Recommendation:  OIG recommends that the Director, DOA, revise the APM to require the CO to seek price reductions on contracts awarded through GSA’s MAS program unless there are extenuating circumstances, or based on price analysis or other assessment, the CO determines that the MAS contract price represents the best value at the lowest possible price. In such cases, the CO should be required to document the reason for not seeking a price reduction.

Management Response:  DOA agrees with the OIG’s assertion that prices established on GSA Federal Supply Schedules or Multiple Award Schedules should be carefully evaluated. FDIC cannot merely assume these GSA prices offer the best value for FDIC requirements. However, in each of the contracts reviewed by the OIG, the prices paid by FDIC were determined to be fair and reasonable and to represent the best value for the FDIC based on adequate competition. In none of these examples did the FDIC Contracting Officer rely on the GSA prices alone.

DOA does not believe it is necessary or appropriate to establish a requirement for Contracting Officers to request discounts from the GSA schedule prices in all situations. Each procurement action must be evaluated based on the unique circumstances surrounding the immediate procurement. To require discounts be requested in every instance is not consistent with the need to have each action stand on its own. However, we do agree that the Contracting Officer must adequately document the basis for determining the price to be fair and reasonable and the best value for the FDIC. The Associate Director for Acquisition Services has formally reminded all ASH personnel of their responsibility to carefully evaluate all prices being offered and to provide adequate documentation that the price is fair and reasonable.

ASB has recently established a training program for contracting personnel. This program requires that all personnel take a formal class in the area of price evaluation. Exposure to this type of training should help improve the ability of ASB personnel to make sound evaluations of price reasonableness based on the unique circumstances of each negotiation.

If you have any 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 ASH

Search | Accessibility | Privacy | Information Quality | Plain Writing Act of 2010 | Contact Us | Site Map | Home
Last updated 8/23/2005