Veterans Affairs’ overspending at conferences linked to poor contract execution

Among the many lapses the Veterans Affairs Department may have committed in planning two lavish training conferences in Orlando, Fla., in 2011 was a failure to adhere to contracting procedures.

The inspector general’s report on the $6.1 million pair of employee gatherings, which led to the resignation of the department’s Chief Human Capital Officer John Sepulveda, focused mostly on overspending, wrongful acceptance of gifts by employees and unnecessary advance trips to plan the conferences.

But it also asserted that in order to hold 57 individual training classes per conference for 1,800 employees VA officials “relied heavily on contractors -- primarily the vendor Systems Research and Applications Corp. (SRA) -- for their expertise in planning and executing conferences.” The IG added that auditors “could not determine to what extent conference-related decisions were made by the contractors involved and whether VA maintained an appropriate level of control over these decisions.”

VA contracting officers working with the Orlando World Center Marriott, the hotel that hosted the two events, mishandled the contract enforcement, the IG determined, resulting in $280,698 in overpayments for catering and questionable expenditures on videos of the meetings. Other questionable purchases included unauthorized expenses for computer rentals for registration and training classes; $97,906 in promotional items; $3,000 in unauthorized commitment for photographers (despite the existence of staff VA photographers.); and $11,507 in miscellaneous expenses, such as signs, table banners, exhibit booths, janitorial services and pocket organizers.

Conference planners, the report concluded, lacked the authority to commit government funds for these purposes.

The IG also criticized the Marriott in Orlando for making “gifts that VA employees are not permitted to accept” in its efforts to book future conferences. Those included meals, upgraded rooms, spa treatments and massages, transportation, gift baskets, Rockettes entertainment tickets, and a helicopter ride.

The IG noted the proposed firm, fixed-price contract of $335,800 with Marriott did not undergo the required technical or legal review before it was awarded. That failure, the inspector general said, put VA “at great financial risk, introduced legal ambiguities, and validated the necessity of obtaining a technical and legal review of proposed contracts.”

The contract specialist and contracting officer responsible said they were aware of the policy and the omission of the required review was an oversight.

The contracting officer also was faulted for not providing documentation on negotiating the conference price with the hotel, as required by the Federal Acquisition Regulation. That officer and other VA employees “improperly made commitments to pay expenses” totaling $173,577 for catering, food, beverages and audiovisual services with their purchase cards. “We determined these expenses were outside the scope of [redaction]s purchasing authority and constituted unauthorized commitments,” the IG said.

In one case, the contracting officer spent $16,500 and “improperly authorized the Marriott to compile a daily `Happy Face Video,’ which was a recapitulation of highlighted conference events from the previous day,” the report said. “The daily videos included dancing, karaoke singing and nontraining activities. The videos did not add value to the conferences and actually diminished the legitimate purpose of the training.”

Finally, the contracting officer did not execute a contract modification to change the pricing schedule listed in the firm-fixed-price contract.

A Marriott spokesman said the hotel chain regularly reviews its procedures for serving federal customers. “Our government guests are important to us; we have and will continue to work hard to meet the lodging and meeting needs of various state and federal agencies by offering them cost-effective hospitality options,” Marriott global corporate relations spokesman Thomas Marder said in an email to Government Executive. “We’re engaged in looking at our processes to ensure that our business practices comply with the special procedures required by government customers.”

He added the VA inspector general report “acknowledged the value of holding meetings to support the agency’s ongoing mission, and, going forward, we will continue to provide the best service we can to our federal agency customers.”

The Fairfax-Va.-based SRA was given $2.8 million in contracts by the Office of Personnel Management to help in planning; communication; instructional design, administrative tasks such as registration; developing a conference logo; coordinating conference space; fulfilling food and beverage and audiovisual requirements; securing a keynote speaker; and evaluating training, supplies and shipping.

In reviewing the contractor’s work, the IG staff said auditors had received all detailed invoices, but noted, “SRA bundled invoice expenses, comingled conference expenses with other unrelated conference expenditures, and did not provide appropriate support to demonstrate that its staff had actually incurred some of the expenses.”

SRA spokesman Mark Hein told Government Executive that the company, which works with nearly every federal agency, “cooperated fully and provided all of the detail requested,” and referred additional questions to the IG.

Rep. Jeff Miller, chairman of the House Committee on Veterans' Affairs, strongly condemned VA’s handling of the conferences. “The OIG found that VA employees acted on their own, without regard to the law or advice from VA’s general counsel, to seek and receive concessions from the hotel, some in order to bring their families to enjoy a VA-paid vacation,” he said.

“The report also calls into question interagency agreements that helped to fund these conferences, and provided what VA has called ‘freebies’ for attendees. Of particular concern is funding that came through the Department of Health and Human Services,” Miller said.

The lawmaker estimated that 10 percent to 15 percent of VA’s conference spending, or between about $10 million and $15 million a year, is wasted. “But to put this specific conference into context,” he said, the OIG found that $762,197 of the overall costs were wasteful.” As a comparison, he added, the entire General Services Administration training conference held last year in Las Vegas totaled $823,000. Revelations about lavish spending at that conference caused nearly a dozen GSA employees to lose their jobs.