Supply Contract Terminations:

GSA Is Missing Opportunities to Recover Costs From Vendor Default

GGD-94-137: Published: Jun 15, 1994. Publicly Released: Jun 15, 1994.

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Pursuant to a congressional request, GAO reviewed the General Services Administration's (GSA) efforts to assess and collect claims against supply vendors that default on government contracts.

GAO found that: (1) as of 1993, GSA had collected almost $1 million of the nearly $2 million in claims against vendors that defaulted on supply contracts; (2) 20 of the 40 contracts that were terminated between 1990 and 1993 experienced product price increases or increased administrative costs, and GSA did not attempt to recover the costs for the 20 contracts; (3) GSA does not emphasize the importance of assessing claims against vendors on defaulted contracts, lacks the resources or information necessary to pursue claims, and does not have adequate claims administration practices to quantify unclaimed replacement product costs, identify the extent of defective product costs, or project the total amount of unclaimed costs; (4) GSA needs to recover vendor default costs because the total amount of unclaimed costs is significant; and (5) GSA efforts to improve its collections against vendors in default include emphasizing the importance of assessing claims to its contracting officers and initiating actions aimed at improving its ability to monitor and collect the claims it assesses.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: GSA has completed several actions and has others under way aimed at improving GSA's monitoring of contract terminations and the management information data it uses for assessing and collecting vendor claims. For example, GSA expanded guidance to contracting officers with criteria for use in assessing defective product costs, including consideration of costs for storage as well as disposal. In addition several procedures were issued to administrative contracting officers concerning assessment and collection of costs from contractors in default.

    Recommendation: To help ensure that GSA pursues claims to recover the full range of costs it incurs when vendors default on supply contracts and to improve its management oversight of the claims process, the Administrator of General Services should ensure that the Federal Supply Service (FSS) and the Office of Finance complete, effectively implement, and sustain ongoing initiatives that are intended to improve the quality and usefulness of GSA data for assessing claims and its ability to collect amounts due under the claims it does assess.

    Agency Affected: General Services Administration

  2. Status: Closed - Implemented

    Comments: Five of GSA's action items address this recommendation. GSA's actions are aimed at strengthening its guidance for assessing claims for costs associated with defective products, including holding and disposal. To date, all of the five action items have been completed.

    Recommendation: To help ensure that GSA pursues claims to recover the full range of costs it incurs when vendors default on supply contracts and to improve its management oversight of the claims process, the Administrator of General Services should expand the guidance contracting officers use in assessing claims to include criteria for calculating and assessing the costs associated with defective products.

    Agency Affected: General Services Administration

  3. Status: Closed - Implemented

    Comments: GSA reports that programming and testing on the new consolidated information system on contract terminations has been completed. As a result, quality control data were added to the procurement information database.

    Recommendation: To help ensure that GSA pursues claims to recover the full range of costs it incurs when vendors default on supply contracts and to improve its management oversight of the claims process, the Administrator of General Services should enhance management oversight by refining GSA management information systems to include complete and reliable data on the universe of contract terminations for vendor default, the nature and total amount of any assessable costs, whether claims have been assessed to recover these costs, and total claims assessed and collected.

    Agency Affected: General Services Administration

  4. Status: Closed - Implemented

    Comments: GSA believes that improvements to the management information system will provide it with the ability to oversee the effectiveness of assessing and collecting these costs.

    Recommendation: To help ensure that GSA pursues claims to recover the full range of costs it incurs when vendors default on supply contracts and to improve its management oversight of the claims process, the Administrator of General Services should continuously oversee and evaluate GSA overall effectiveness in recovering these costs.

    Agency Affected: General Services Administration

 

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