IG: Defense broke buying rules with purchases through NASA

A study of Defense Department contracts placed through NASA found most violated acquisition regulations and department policy.

The Defense inspector general, acting on a requirement in the fiscal 2006 Defense authorization act, conducted a review of contracts placed through a major NASA governmentwide acquisition contract vehicle for information technology called the Scientific and Engineering Workstation Procurement. Defense reported placing 6,569 orders worth $343.2 million through SEWP contracts in fiscal 2005.

But after reviewing 111 selected contract orders worth $85.9 million, auditors found that 98 had major contracting or funding problems. Among these, 69 were placed without following federal contracting regulations on opening competition opportunities to all registered contractors. Seventy-one orders did not include justification for using a non-Defense contract vehicle, contrary to department policy

Twenty-six orders did not adequately document the award decision, making it impossible to determine whether proper steps were taken to secure the best deal, and 14 orders, valued at $19.6 million, were identified as possible violations of the Anti-Deficiency Act, which prevents agencies from spending funds in excess of appropriations.

"As a result," auditors said, "funds were not used as intended by Congress, competition was limited, and DoD has no assurance it received the best value."

One reason officials encourage buying through Defense contracts rather than going outside the department, is agencies pay fees to NASA for using the SEWP contracts. The fees are generally 0.65 percent of the total dollar amount, but do not exceed $10,000, according to the report.

Based on the findings, auditors recommended that top Defense acquisition officials require contracting officers to check, before placing an order on a non-Defense contract, whether the same goods or services can be obtained on a Defense contract with the same convenience and price. They proposed that contracting officers be required to document in writing their justification for going outside the department.

One Navy official only partly agreed with the suggestion, saying contracting officers' research should be limited to contracts within the same command and other contracts the officer is aware of. The official argued that limiting the search to known contracts was justified because there is no Defense-wide contract search tool.

Auditors rejected that view, noting that in analogous cases in which Navy contracting officers set out to award a new contract, their research includes both Navy and other Defense contract vehicles.

Auditors also recommended that Defense agencies develop training for contracting officers and others on placing orders through outside agencies, emphasizing appropriations laws related to the Anti-Deficiency Act.

They directed a series of recommendations to the undersecretary of Defense for acquisition, technology and logistics, suggesting that he remind contracting officers that they must follow acquisition rules on fair opportunity and maintain proper contract files, and that they are responsible for knowing and adhering to acquisition regulations.

"Training is needed to ensure that misapplication of procurement regulations is not passed on among contracting officials," the auditors wrote.

The director of Defense procurement told auditors that a policy memorandum would be issued on Nov. 15. As of Thursday the notice was not listed among others on a Defense procurement policy Web site.

Defense auditors finalized a report on orders placed through the General Services Administration's contracts in October, and a draft report on the use of the Interior Department's contracts was circulated in September. A similar report on Defense use of Treasury Department contracts also was expected under the fiscal 2006 authorization act, and the requirement will be continued under the fiscal 2007 law.