GSA to minimize auditors’ role in pre-contract award reviews

Administrator plans to use contractors to verify that companies applying for schedule contracts are listing reasonable prices.

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.

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