GovernmentExecutive.com

The chief of the General Services Administration is planning to curtail the role of the agency's audit branch in scrutinizing the prices offered by vendors with multiple award schedules contracts.

GSA's inspector general has been analyzing, as a reimbursable service for the agency, companies' private sector marketing strategies to ensure they give the federal government their lowest price possible. Now, much of that pre-award price verification work will go to small, service-disabled and minority-owned businesses, GSA Administrator Lurita Doan said Thursday at an industry breakfast in Reston, Va. The agency also plans to contract out some post-award assessment work, she said.

The presence of federal auditors can cause nervousness, Doan said. "If you know that someone is auditing you, there's a stress factor, I guess you could say," she told reporters at the breakfast event, which was sponsored by the Northern Virginia Technology Council, a trade association with about 1,100 member companies. She did not say when the small companies would be hired to take over the work.

Last year, GSA ramped up pre-contract award price investigations of companies applying for a place on the GSA schedules -- lists of goods and services available to agencies across government. The heightened attention came after members of Congress applied pressure.

Pre-award price verifications are not formal audits, so there is no legal requirement that the inspector general perform them. The private sector reviewers will give "third-party objectivity" in pre- and post-awards, Doan said. At the same time, the change will help the small business community, she added.

During the past two years, inspector general pre-award scrutiny has resulted in $1.1 billion worth of price decreases, said Eugene Waszily, GSA's acting deputy inspector general. GSA auditors' rates are $50 an hour, so total charges amounted to between $4 million and $4.5 million during that period, he said.

The inspector general's office has never charged for any post-award work. This is because although others can complete some administrative tasks at this stage, only the inspector general can subpoena material for an audit. "In the post-award area, where there is clearly something that seems to be amiss, then they're treading into the IG's territory," Waszily said.

He said Doan has notified the inspector general of her small business contracting intentions, but the details remain unclear.

Federal auditors likely would do a better job than private sector accountants on pre-award reviews, Waszily said. If companies fail to cooperate with a small auditing firm -- and it sometimes takes GSA auditors five or six tries before they get all relevant marketing data -- the small firm may not be as well-positioned to follow up as federal auditors would be, he said.

"We're more tenacious.... We know what we're looking for, we know the lay of the land, we know basically when we're getting a snow job," Waszily said. Most small accounting firms generally just look at financial statements, and not the sales and marketing practices necessary to verify prices, he said.

Losing pre-award price verification work to the private sector would create "issues" for the inspector general, Waszily said. Federal auditors would have to begin verifying the quality of the small firms' work, he said. They also would lose a data stream for use in real audits.

This is not the first time the idea of contracting out verification work to the private sector has been proposed, Waszily said. In the past, companies resisted the notion for fear that possible competitors could end up scrutinizing proprietary market data.

Federal auditors are told from day one that "if you disclose proprietary data, you're toast," Waszily added.

COMMENTS

• Digging out will only occur if voters act rationally and sanely at the polls on Nov 7. To do otherwise is merely to "stay the course," which is leading us down to the 7th circle of you-know-where. We need oversight more than ever these days. I pray we get it right this time. GovExec.com reader Posted October 23, 2006 2:18 PM
• Bravo! This, I predict, will have a significantly greater effect than all of GSA’s previous efforts to get user agencies to seek competition between multiple-award schedule holders, or enter into further price negotiations with them. If anyone in the government procurement still places much reliance on GSA’s ability to offer contracts representing the best prices, let alone value, this should dispel any lingering delusion. The contention that private sector auditors will be able to do a better job of price reviews than a government entity is just lame -- the GSA acting deputy inspector general's statement notwithstanding. If you want to ensure that you're getting the best deal, buyers have to play hardball. Of course, now that the new FAS has a proven acquisition professional at the helm, maybe this boat will get turned into the wind. Mark S. Pfeiffer Posted October 20, 2006 1:08 PM
• I am thankful for Govexec.com ’s honest coverage of contracting issues, which has extended to the risky territory of severe over-charging of taxpayers by contractors. Honest contractors and consultants have nothing to fear from the long established practice of inspector general oversight. Why is this oversight being outsourced during a time where we hear every day of a new case of corruption involving crooked contractors and their lobbyists? This is not the way to improve the government or the country. I thought we had decided to start digging out and solve problems. Joseph Posted October 19, 2006 9:06 PM