Federal Energy Administration's Contract with the Advertising Council, Inc., for a Public Relations Campaign on the Need to Save Energy

PSAD-77-151: Published: Aug 31, 1977. Publicly Released: Aug 31, 1977.

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In October 1973, the Advertising Council, Inc., was selected to conduct a nationwide public service advertising campaign to encourage energy conservation. Although the contract expired in September 1975, contractural disputes have prevented final monetary settlement.

Following expiration of the contract, Federal Energy Administration personnel began to question whether the Council should be reimbursed for some of the costs, and former personnel publicized allegations of fraudulent claims. No indication of fraud was found. There were some costs that appeared questionable until subjected to further audit. Of the $18,985 questioned, $11,351 was allowable, $4,336 was unallowable, and $3,296 was unresolved. The government has withheld $25,659 pending resolution of this matter. The cost questions can be attributed to a lack of understanding and agreement as to what constituted reimbursable expenses. The creative services subcontractor's personnel were not familiar with the Federal Procurement Regulations and followed what they considered to be routine business procedures.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Federal Energy Administration should direct its contracting officer to reimburse the Council $18,027, the difference between the amount unpaid and the amounts unallowable or still in question, and to make a final determination on the $3,296 in unresolved costs and expedite a final settlement. The Advertising Council, Inc., should develop and employ procedures that will alert its subcontractors to applicable federal cost principles.

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