Pentagon computer system leads to cost overruns
But the supply center's automated system does not check with multiple vendors to get the best price, the Pentagon IG found. Instead, it selects the vendor at the top of a rotating list and only notifies procurement officers when a price is more than 25 percent higher than the last price paid for the same item. The blanket purchase agreement used by the supply center allows vendors a 30 percent markup. The audit also took issue with the method used by the Defense Logistics Agency to identify overcharges. The agency looks at whether the total orders placed with a vendor surpass the 30 percent markup limit, rather than identifying specific orders that exceed the limit. This provides no incentive for vendors to submit bids with less than a 30 percent markup, according to the report. "The methodology used… gave no credit to vendors for purchase orders that had less than a 30 percent markup," the IG report said. DLA intends to add a competitive feature to the automated system so it automatically selects the best price offered by vendors. Still, the agency defended its method for tracking overcharges in its comments on the report. "While we are sometimes overcharged on individual low-dollar value awards, [the tracking program] provides a fair and effective means of protecting the government's interests, obtaining refunds when appropriate, and removing contractors who repeatedly attempt to abuse the system," wrote Frank Lotts, deputy director of the Defense Logistics Agency. The agency also disputed the audit's methodology for computing overcharges and statistical sampling. The Pentagon IG called on DLA to make the automated system competitive and to create a training guide so procurement officers are better able to catch overcharges, among other recommendations.