FDIC's Contract Administration

September 2006
Evaluation Report 06-026


CORPORATION COMMENTS


DATE: September 29, 2006
 
MEMORANDUM TO:Stephen M. Beard
Deputy Assistant Inspector General for Audits
 
THROUGH:John Bovenzi
Deputy to the Chairman and Chief Operating Officer
 
FROM:Arleas Upton Kea
Director, Division of Administration
 
SUBJECT:Management Response to the Draft OIG Evaluation Report Entitled,
FDIC's Contract Administration
 

This is in response to the subject Draft Office of Inspector General (OIG) Report, issued August 25, 2006. In its report, the OIG identified 13 recommendations.

While we recognize that improvements can be made to the contract administration process, we appreciate that the OIG noted that the Division of Administration's Acquisition Services Branch (ASB) has a number of initiatives in progress to improve the efficiency and effectiveness of contract administration. This response outlines our planned corrective actions for each of the recommendations cited in the OIG's Report.

MANAGEMENT DECISION

Finding: Strategic Management of Oversight Managers (OMs)

Condition: The lack of adequately trained OMs puts the Corporation at risk of not having personnel with adequate skill sets to effectively manage contracts and may limit opportunities for cost savings in the acquisition of goods and services for the FDIC.

Recommendation 1: That the Director, Division of Administration (DOA) establish a program for strategically managing the Corporation's OMs. This program should include a:

Management Response 1: DOA concurs with this recommendation.

Corrective Action: DOA believes that a program to strategically manage the Corporation's OM workforce is a crucial element in creating a results oriented acquisition workforce focused on partnering, performance, quality and accountability through all phases of the acquisition cycle. Some efforts, such as development of an appropriate OM training curriculum are in process and efforts have already been initiated with Corporate University (CU) to provide the required training to include a CU approved action plan and budget. In July 2006, a Principal Contract Analyst was assigned to oversee OM programs and serve as the primary liaison on OM issues. This individual will be responsible for developing a comprehensive evaluation of OM needs as they relate to the current acquisition environment at FDIC. The program will include benchmarking against other Federal Agencies to determine best practices in management of the OM function, and appropriate practices for FDIC will be incorporated into the program.

Date of completion: March 31, 2007

Recommendation 2: That the Director, DOA coordinate with the FDIC's Human Resources Branch and Legal Division to determine the feasibility of including, in OM's performance ratings, performance criteria related to overseeing and administering contracts.

Management Response 2: DOA concurs with this recommendation.

Corrective Action: Initial contacts have been made with representatives from DOA's Human Resources Branch (HRB) and the Legal Division regarding this recommendation. Several issues were identified that must be considered. Further discussions and coordination will be undertaken with HRB and the Legal Division to develop a corporate position on the feasibility of including contract management performance criteria in the OM performance work plans.

Date of completion: November 30, 2006

Finding: Acquisition Policies and Procedures

Condition: ASB needs to place a higher priority on completing revisions to the APM to reflect organization changes, new acquisition approaches, process changes, and system changes.

Recommendation 3: We recommend that the Director, DOA establish firm target dates and devote dedicated resources for completing the APM and related contracting documents, contract clauses, and provisions.

Management Response 3: DOA concurs with this recommendation.

Corrective Action: A team composed of contract policy and legal personnel has begun work on updating the APM and related contracting documents. A dedicated ASB project lead has been designated to keep the effort on course. Additionally, a dedicated representative from FDIC Legal Division has been assigned to the project. The proposed restructuring project entails revising the APM to be a policy document with implementing procedures contained in a separate guide. This will minimize the number of changes that must be made to the APM as the acquisition environment evolves and will allow procedures to be modified more easily as organization needs change. In addition to revising the APM, this team is tasked with creating templates, standard documents, best practice guides, web-based tools, and training.

To date, the team has benchmarked the APM against policy manuals from other government agencies who are also exempt from the Federal Acquisition Regulation, reviewed previous OIG audits to identify those items that need immediate corrective action, interviewed all ASB contracting personnel to solicit recommendations for what to work on first, and begun to draft the revised APM. Incremental release of portions of the revised APM along with the accompanying set of specific procedures will occur throughout the process. By August 2007, ASB will have a complete draft of the revised APM ready for review and coordination through the corporate directives procedure.

Date of completion: December 31, 2007

Finding: Administration of Contracts

Condition: ASB and program offices could improve the ongoing management of contracts following contract award.

Recommendation 4: We recommend that the Director, DOA reiterate to all acquisition personnel, including OMs, the requirement to use CEFile to record contract documentation and events.

Management Response 4: DOA concurs with this recommendation.

Corrective Action: As acknowledged by the OIG, ASB has issued policy and guidance on the use of CEFile as the official contract file of record. Most recently, Procurement Administrative Bulletin 2006-07, issued August 31, 2006, provided contract specialists further guidance on establishing contract files in CEFile and reiterated the requirement to enter file documentation on a timely basis. ASB has also included this requirement in the Oversight Manager Refresher training. ASB will issue another memorandum to remind all contract specialists and oversight managers of their responsibility to maintain and adequately document their respective contract files in CEFile. This memorandum will reference the existing policy and guidance. The Letter of Oversight Manager Confirmation appointing the OM will be modified to include the requirement for the use of CEFile.

Date of completion: October 31, 2006

Recommendation 5: We recommend that the Director, DOA issue guidance to contract specialists and OMs that lists specific contracting documents and contracting events that should be recorded in CEFile and standardizes the organization and location of required documents within CEFile.

Management Response 5: DOA concurs with this recommendation.

Corrective Action: ASB's implementation of Interim Acquisition Policy (IAP) #2004-5 Implementing CEFile, dated August 10, 2004, established the requirement to maintain electronic contract files. That guidance did not eliminate the existing requirement for contract specialists and oversight managers to maintain the contract documents identified on the contracting file checklists (APM Exhibits XXII and XXVII) in the contract file. The CEFile Desk Companion section entitled, Acceptable Name Identifiers for Documents in the FDI, provided guidance for naming documents and standardizing the organization and location of required documents within CEFile. Understanding that business practices have evolved, ASB will review and update the contracting file checklists and CEFile Desk Companion to reflect current policy and procedures. ASB will provide additional written guidance to contract specialists and oversight managers which will standardize the organization and location of required documents within CEFile.

Date of completion: December 31, 2006

Recommendation 6: We recommend that the Director, DOA establish an internal quality review program or process for routinely monitoring CEFile to ensure completeness of individual contract file contents.

Management Response 6: DOA concurs with this recommendation.

Corrective Action: The most critical review of a contract file is the review conducted by the Contracting Officer prior to executing a contract. This is the first, and most vital, step in ASB's quality review program. Numerous policies have been established and reminders have been issued to emphasize the requirement for all contract file documentation to be maintained in CEFile. For example, in August 2005, the ASB Associate Director issued guidance which specifically stated "We will follow the procedures outlined in Interim Acquisition Policy #2004-5. This policy, which was issued on August 10, 2004, states that all contract reviews are to use contract files established in CEFile. Contracting Officers are not to sign any contractual actions (including modifications) unless the contract file is in CEFile." In 2005, ASB placed significant emphasis on the need to load all contract documents into CEFile. By October 31, 2005, every contract specialist was required to confine that all of their contract files had been established in CEFile and contained all of the required documents needed to properly conduct contract administration.

In addition to the Contracting Officer's review of the contract file, IAP #2004-03 Implementing Pre- and Post- Award Review Policy, dated March 4, 2004, established an internal quality review program. Although some of the elements of the program were not fully implemented during the time ASB experienced the most severe personnel shortages, recent hiring actions have enabled ASB to revitalize this program. This program establishes procedures for both pre-and post-award review of contract files by the Policy and Operations Section. These reviews are accomplished by reviewing file documentation within CEFile. These reviews serve as an additional internal control to ensure completeness of file documentation in CEFile. Pre-award reviews have already been reinstituted and the required quarterly post-award reviews will be reinstituted in the fourth quarter. CEFile and the completeness of individual contract files are a review element.

Date of completion: December 31, 2006

Recommendation 7: We recommend that the Director, DOA, in conjunction with recommendation 2, ensure that the adequacy of contract file documentation is considered in the performance appraisal criteria related to overseeing and administering contracts.

Management Response 7: DOA concurs with this recommendation.

Corrective Action: The standard performance plan in use for all contract specialists includes the performance evaluation criterion, Analytical and Technical Skills, which requires the specialist to demonstrate an up-to-date knowledge of relevant laws, regulations, and policies and to stay apprised of any changes. This knowledge is demonstrated in the adequacy and completeness of the contract documentation. Although contract file documentation is not specifically called out in this performance criterion, "Analytical and Technical Skills" is appropriate for addressing file documentation. Completeness and quality of contract file documentation has been considered during the performance evaluation of contract specialists and contracting officers. The ASB Associate Director will issue a specific reminder to ASB managers to use this criterion to address performance regarding the adequacy of contract file documentation. Additionally, should the Corporation approve the implementation of Recommendation 2, completeness and quality of contract file documentation will be considered during the performance evaluation of oversight managers.

Date of completion: Reminder to ASB managers - September 30, 2006

Decision on Implementing Recommendation 2 regarding Oversight
Managers- November 30, 2006

Recommendation 8: We recommend that the Director, DOA reevaluate whether the Contract Administration Plan (CAP) and the Oversight Management Monitoring Plan (OMMP) are effectively designed to facilitate contract specialist and OM administration of large or complex contracts. Revise the CAP and OMMP as needed, or establish other mechanisms and reiterate to contract specialists and OMs the need to complete and utilize those plans or mechanisms.

Management Response 8: DOA concurs with this recommendation.

Corrective Action: DOA agrees that the CAP and OMMP, as currently written, are not adequate tools. Both the CAP and the OMMP are intended to assist the CO, OM, and Technical Monitor in administering contracts to ensure that contract requirements are met. This issue will be addressed during the updating of the APM discussed in Recommendation 3. Benchmarking with other federal agencies will also assist ASB in developing appropriate tools and processes that will provide oversight continuity for all parties involved. DOA will ensure that these tools and processes are included during the APM update. While this effort is underway, a reminder will be issued to all contract specialists and OMs addressing the requirement to complete and follow current guidance on CAPS and OMMPs.

Date of completion: Reminder to contract specialists and OMs - October 31, 2006

Revised CAPs and OMMPs -- January 31, 2007

Recommendation 9: We recommend that the Director, DOA work with DIT and the Legal Division to establish a more-defined EVM program supported by procedures and resources capable of interpreting and acting on EVM results and data.

Management Response 9: DOA concurs with this recommendation.

Corrective Action: DOA, DIT and the Legal Division will coordinate to develop a corporate EVM program. Representatives from these organizations have met to discuss establishment of the FDIC EVM program. Additionally, DIT and ASB are working with Corporate University to develop appropriate EVM training that will allow for effective implementation of the EVM program throughout the FDIC.

Date of completion: March 31, 2007

Recommendation 10: We recommend that the Director, DOA coordinate with the Legal Division to determine any legal issues that need to be addressed when closing out open contracts. Depending on legal issues identified, establish a risk-based approach, including time frames and priorities for formally closing out open contracts.

Management Response 10: DOA concurs with this recommendation.

Corrective Action: DOA will coordinate with the Legal Division and establish a risk-based plan, including timeframes and priorities, for formally closing out open contracts.

Date of completion: November 30, 2006

Recommendation 11: We recommend that the Director, DOA dedicate sufficient resources to close out all open contracts in a timely manner. Consider hiring a contractor to assist in this endeavor if staff is not available.

Management Response 11: DOA concurs with this recommendation.

Corrective Action: As noted in Management Response 10, DOA will develop a plan addressing contract closeouts. As a part of this plan, DOA will consider current staffing levels and workload in order to determine what type of resources will be necessary to close out contracts in a timely manner. If it is determined that internal FDIC resources are not adequate to address this issue, we will pursue obtaining outside assistance.

Date of completion: November 30, 2006

Finding: Contract Management System

Condition: Without an effective contract management system, the acquisition workforce may not have ready access to sufficient information to assure proper contract management and oversight or to make informed strategic acquisition decisions.

Recommendation 12: We recommend that the Director, DOA work with DOF and DIT to promptly remediate inaccuracies in the Alert Report and Purchase Order Summary Report and resume distribution of corrected informational reports to contracting officers and contract specialists.

Management Response 12: DOA concurs with this recommendation.

Corrective Action: DOA has recently initiated several processes that will enhance the availability and accuracy of contract information obtained from NFE. In August 2006, DOA worked with DIT to determine reporting query changes required to ensure accurate expiration dates are stated on the Alert Report and Purchase Order (PO) Summary Report. DIT anticipates these changes will be completed by October 2006. Upon completion, reports will be distributed to all contracting officers and contract specialists. DOA also conducted training for acquisition personnel on a new process for linking individual task orders to the basic contract, thereby eliminating the risk of duplicate contract values being reported on summary management reports.

Date of completion: November 30, 2006

Recommendation 13: We recommend that the Director, DOA work with DOF and DIT to define requirements for the new automated procurement system, including to address the NFE shortcomings identified in this report.

Management Response 13: DOA concurs with this recommendation.

Corrective Action: In cooperation with DIT, DOA recently awarded a task order for the acquisition of an Automated Procurement System (APS). The objectives of the APS are consistent with the recommendations of the OIG. Following the Rational Unified Process (RUP) prescribed by DIT, the core functionality of APS is scheduled for completion in December 2007.

Date of completion: December 31, 2007

If you have any questions regarding this response, FDIC's point of contact for this matter is William Gately. Mr. Gately can be reached at (703) 562-2118.


cc:James H. Angel. Jr., OERM
Michael E. Bartell, DIT

Last updated 10/17/2006