Pentagon takes another hit for interagency contracting practices

Government auditors have taken another swipe at the Defense Department's interagency contracting procedures, concluding that many of the Pentagon's purchases through the Veterans Affairs Department in fiscal 2006 "were either hastily planned or improperly administered."

In a report released late last week, Defense's inspector general found that department management and Veterans Affairs contracting officials failed to comply with the Federal Acquisition Regulation and Pentagon procurement rules when making purchases through VA.

The IG reviewed 49 purchases at Defense organizations -- primarily the Air Force -- and found fault with all but three procurements.

"Specifically, DoD organizations lacked acquisition planning to determine the best source, proper statutory authority and required agreements for non-DoD contracts," the report stated. "The VA and DoD organizations were also deficient in contract administration, including the surveillance of contractor performance, assignment of contracting officer representatives, preparation of quality assurance surveillance plans, and collection and recording of contractor past performance."

The criticism, however, was not reserved exclusively for Defense officials. The IG found that of 24 purchases reviewed at VA contracting offices, two-thirds were not properly awarded and more than half did not have the support necessary to determine if the prices offered were reasonable. Meanwhile, of 11 sole source procurements examined, contracting officials failed to justify the lack of competition with eight.

"As a result, DoD organizations had no assurance that the purchases were based on best value or that the VA used effective and efficient acquisition procedures," the IG stated.

The IG recommended that the department initiate a training course and establish more comprehensive policies regarding the use and management of interagency contracts.

Similar recommendations were first suggested in an October 2006 IG report on the Pentagon's interagency purchases through the General Services Administration. But according to the IG, many of those recommendations were not implemented.

But the department now appears ready to heed the IG's advice. In a written response to the report, Shay Assad, director of Defense procurement and acquisition policy, said the Defense Acquisition University has begun a review of all materials related to interagency contracting and plans to offer a course on the subject beginning next month.

Assad added that his office will soon issue an update to its policy on the proper use of non-Defense contracts as well as a memorandum of agreement with VA "that will address roles and responsibilities regarding contracting administration and surveillance duties."

In fiscal 2006, Defense made more than 1,700 interagency purchases of goods and services through VA, worth more than $373 million. Nearly 90 percent of those purchases were made by the Air Force. The relationship between the two agencies was boosted in 2005 by an agreement that the Air Force surgeon general would use VA as its primary interagency contracting support organization for health care acquisitions.

Despite those outlined regulations, the IG found that the surgeon general's office improperly used VA's acquisition office in Austin, Texas, to obtain leased space through a service contract. The surgeon general's office said it is working to correct the problem.

Air Force Deputy Surgeon General Charles Green added that his office was working with VA to amend the MOA between the two agencies and better spell out which types of purchases are allowable.

The VA report is the latest in a series of critical examinations of the Defense Department's interagency contracting procedures.

In November, the IG found that Defense contracting officials unfairly limited competition and failed to follow FAR and Defense acquisition regulations when making purchases through the National Institutes of Health's ECS III and CIO-SP2i multiple-award contracts.

The IG also has discovered problems with Defense's interagency contracts with the Interior and Treasury departments and with NASA.