Resolution Trust Corporation:

Ineffective Management of HomeFed Bank Environmental Services Contracting

GGD-94-62: Published: Dec 28, 1993. Publicly Released: Dec 28, 1993.

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GAO reviewed the Resolution Trust Corporation's (RTC) management of the HomeFed Bank environmental services contract, focusing on the potential taxpayer liability and costs associated with identifying and managing environmentally sensitive assets.

GAO found that: (1) HomeFed environmental services contracts were not timely completed, and experienced cost overruns because RTC contract management was ineffective; (2) RTC was not able to complete the required services, and its service costs increased because it did not establish realistic lead times, plan workloads, identify potential problems, ensure the adequacy of work statements, or allocate sufficient staff to effectively oversee the contract; (3) RTC contract administration was deficient because it did not communicate project requirements and participant responsibilities effectively, follow contracting procedures, make key staff available to respond to contractor questions, adequately control the assignment of assets, or provide continuity in its management oversight; (4) RTC lack of communication contributed to delays in asset sales and report completion; (5) RTC did not adequately oversee the environmental services contract and the performance of its contracting staff; (6) the majority of RTC environmental assessments were untimely and many of the assessment reports were duplicate orders; and (7) although RTC has developed new record and file management procedures, it needs to strengthen its oversight of the contracting process and ensure that its contracting policies and procedures are effectively implemented.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On June 30, 1994, RTC's Vice President, Division of Contracts, Oversight and Evaluation, sent a memorandum to all RTC managers and supervisors on the supervision of contract oversight managers. In this memorandum, he reminded the managers and supervisors of the critical nature of the contract administration responsibilities done by their staff, who have been designated as oversight managers for RTC contracts. He emphasized that managers and supervisors must take care to ensure that oversight responsibilities would be performed on a continuous basis by appropriately qualified personnel. However, RTC has been unable to provide evidence that this memorandum has been implemented by headquarters and field offices involved in contract administration activities. Nevertheless, GAO is closing this recommendation at this time because RTC is winding down and will cease operations by the end of 1995.

    Recommendation: To improve the management and administration of environmental services contracts, the President and Chief Financial Officer, RTC, should reemphasize the importance of supervision and assessment of staff performance and ensure that the internal control supervision standard is followed.

    Agency Affected: Resolution Trust Corporation

  2. Status: Closed - Implemented

    Comments: RTC conducted a staffing study to determine how many people would be needed at each field location to adequately manage and administer contracts, and assigned additional staff for this purpose. However, the beginning of the transition to FDIC with the closing of offices in preparation for RTC's sunset makes it virtually impossible for RTC to fully implement this recommendation. RTC's current efforts are on closing and terminating contracts and identifying contracts that will be transferred to FDIC upon RTC's closure in December 1995. In view of RTC's approaching sunset, and the fact that most of the staff that manage and administer contracts will be released when remaining RTC activities are transferred to FDIC, RTC will not be able to ensure management continuity throughout the full term of currently open contracts. GAO is therefore closing this recommendation at this time.

    Recommendation: To improve the management and administration of environmental services contracts, the President and Chief Financial Officer, RTC, should require that sufficient staff are assigned to manage and administer contracts and ensure management continuity throughout the full term of contracts.

    Agency Affected: Resolution Trust Corporation

  3. Status: Closed - Implemented

    Comments: On June 30, 1994, RTC's Chief Financial Officer advised GAO that the reorganization of the Office of Contract Operations significantly impacted the field monitoring program by allowing a greater concentration of support and liaison with the field offices. The reorganization increased the staffing in the Office of Contracts by 48 positions. The CFO believes that the increased staffing in the Office of Contracts, and the continuing support provided by the Program Compliance Review Office and the Office of Contractor Oversight and Surveillance through their contract reviews, provide sufficient staff to ensure that RTC's contracting policies and procedures are followed and that deviations from policies and procedures are brought to management's attention.

    Recommendation: To improve the management and administration of environmental services contracts, the President and Chief Financial Officer, RTC, should determine whether the Field Monitoring Program is adequately staffed to ensure that RTC contracting policies and procedures are followed under the 10-point reform initiative.

    Agency Affected: Resolution Trust Corporation

 

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