GAO urges better audit oversight of GSA contracts

Teddy Roosevelt once said: 'Walk softly, and carry a big stick.'

That, in a nutshell, is the policy the General Services Administration should follow in policing contracts on its multiple-award schedules, according to the Government Accountability Office. In this case, the big stick is the contract audit, a practice that until very recently had almost disappeared at GSA, along with the savings those audits tend to generate.

At a Capitol Hill hearing last week, David Cooper, GAO's director for acquisition and sourcing management, told Sen. Tom Coburn (R-Okla.) that GSA stopped conducting post-contract-award audits after changing its regulations in 1997, instead promising to increase the pace of pre-award audits. But that didn't happen.

GSA had averaged about 125 audits per year through 1995, Cooper said, saving an average of $83 million annually. But the use of pre-award audits declined noticeably from 1996 on, exposing GSA and other agencies to higher costs.

'As the number [of audits] declined, so did the savings, to only about $18 million a year,' Cooper said. GSA appears to be 'more focused on getting contracts awarded, not on getting the best prices,' he said.

Cooper was testifying before the Senate Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management, Government Information and International Security, of which Coburn is chairman.

GAO said pre-award audits let GSA contract negotiators avoid potential vendor overpricing by verifying pricing information before contracts are awarded. Post-award audits allow negotiators to identify overpricing and recover overcharges.

Kathleen Tighe, counsel to GSA's inspector general, and John Ames, director of the contract review and evaluation division in the IG's office at the Veterans Affairs Department, echoed Cooper's comments.

'We believe defective-pricing audits are an effective measure ... and should be reinstated,' Tighe said.

'We strongly believe that pre- and post-award audits ensure that VA is getting the best price for the American taxpayer,' Ames said.

He estimated his department has received a return of $11 for each dollar spent on audits.

Cooper said GSA has less assurance that vendor-supplied pricing information is accurate, complete and current, and the agency's ability to deter overpricing and recover overcharges has been impaired.

Emily Murphy, GSA's chief acquisition officer, said GSA is considering conducting post-award audits again, and her office has significantly increased the number of pre-award audits.

Murphy added that GSA conducted a complete price verification of all 62 contracts identified in a recent GAO report as lacking the 'documentation needed to clearly establish that the best price objectives were negotiated.' In 93 percent of the cases in question, GSA had negotiated and received prices equal to or better than the offerors' most-favored-customer prices, she said.

The number of audits has been on the rise for three years, Murphy said. 'We've gone from approximately 14 pre-award audits in 2003, to 40 in 2004, to a goal of approximately 70 for [this year] and are working with the IG to continue this growth trend in 2006.'

David Safavian, Office of Federal Procurement Policy administrator, asked that Congress consider the entire acquisition environment.

'I can't sit here ... and defend the status quo. We buy more than anyone else in the world and we should be better at it than anybody in the world, and we're not,' Safavian said. But the federal acquisition system 'is very delicate'changes in one area can have unintended consequenses in another.'

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