Defense tightens reins on outside contracts

The Defense Department is establishing new controls over how it uses the contracts and procurement services of outside organizations, and will implement procedures to ensure that the Pentagon complies with federal regulations, according to the department's chief procurement official.

Recent reports about misuse of those contracts are prompting Pentagon officials to more closely monitor how the largest single purchaser in the government conducts its business.

Deidre Lee, the Defense procurement chief, said in an e-mail response to questions that the department would implement new requirements for using non-Defense contracts and the services of buying agencies such as the General Services Administration. Lee indicated that reports about misuse of those contracts had prompted her to take action.

Concern over how Defense agencies use the contracts and GSA in particular stretch back to at least January. At that time, a manager in the Office of the Undersecretary of Defense for Acquisition, Technology & Logistics, with authority to authorize sending contracting business to GSA, decided not to do so in the wake of a burgeoning procurement scandal.

A copy of the memo, obtained by Government Executive, says, "Contracting improprieties at several GSA offices have finally triggered congressional and IG investigation." It cites news accounts about the GSA's Federal Technology Service, which manages technology contracts for other agencies for a fee.

"Many of you use the Bremerton [Wash.], Kansas City [Mo.], and Atlanta GSA regional offices," the memo continues. "The GSA's own Inspector General has determined that these three FTS regional offices have been in breach of laws and regulations for at least the past three years."

The manager advised others in the Office of the Secretary of Defense that they would have to look elsewhere for contracting services. "I will no longer approve [contract] actions sending business to the GSA offices…or to the Denver GSA office, also under investigation for its practices," the memo says.

The GSA Inspector General has found that FTS offices across the country violated procurement regulations by channeling awards to preferred companies and using technology contracts to buy goods and services outside their scope.

"Clearly using a GSA FTS activity or contract for OSD support is inviting investigation so I urge you to immediately seek other options for contracting." The memo admonishes employees to base their contracting decisions on "a DOD legal opinion, not the word or 'standard practices' of GSA."

The memo set off a firestorm among Defense procurement policy officials, according to a former official with direct knowledge of the memo. According to the official, who spoke on condition of anonymity, procurement executives said the memo's author had no authority to prohibit doing business with FTS or any other agency.

Asked about the memo, Defense's procurement chief Lee said there is no prohibition in place. "We are not opposed to using those vehicles; we are in favor of using them properly," Lee said in her e-mail.

To that end, she said her office "is preparing a new policy to address and ensure the proper use of non-DoD contract vehicles."

Under the policy, a Defense contracting officer will be required to approve in writing all contracts worth more than $100,000 awarded through or placed against contracts managed by other agencies, Lee said. The policy will cover orders placed directly by the department as well as orders issued by outside organizations on the department's behalf, she added. Defense contracting "will also be responsible for ensuring that the requirements are within the scope" of the non-Defense contract and that orders comply with all Defense regulations.

Lee's announcement struck some observers as a token gesture. "Gee, I thought that was the policy all along!" said the former procurement official with knowledge of the memo.

Lee said the rule was an improvement over existing regulations, which require advance approval to buy services through non-Defense contracts. The new policy "extends that approval and oversight to supplies…achieving consistency and instilling discipline in the [Defense] acquisition process," she said. Lee met June 9 with senior GSA officials "to discuss the problems that have been occurring with the use of the GSA ordering schedules," she added. The schedules are contracts that GSA awards for a range of goods and services. The Defense and GSA Inspectors General have found numerous cases of agencies misusing the schedules. Most recently, a contracting organization within the Interior Department used a schedule for technology services to hire interrogators sent to Abu Ghraib prison in Iraq, the scene of several cases of prisoner abuse. Interior's Inspector General has opened an inquiry into that contract order.

"We discussed developing a plan to ensure the proper use of GSA schedules," Lee said. She informed officials, including FTS Commissioner Sandra Bates and GSA Commissioner Stephen Perry, of the department's new rule on outside contracts. "All are in agreement that this additional step is critical if we are to improve the acquisition process governmentwide," Lee said.

Mary Alice Johnson, a GSA spokeswoman, said the meeting with Lee was part of the agency's ongoing efforts "to strengthen acquisition activities."