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Energy Management: DOE Controls Over Contractor Expenditures Need Strengthening

RCED-87-166 Published: Aug 28, 1987. Publicly Released: Sep 28, 1987.
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Highlights

In response to a congressional request, GAO evaluated the Department of Energy's (DOE) management controls over procurement practices, specifically: (1) subcontract activities; (2) procedures to protect against bribes and kickbacks; and (3) payment practices. In addition, GAO gathered information on the cost to the federal government of state-imposed taxes on DOE contractors.

Recommendations

Matter for Congressional Consideration

Matter Status Comments

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Energy The Secretary of Energy should ensure that DOE defense-related operating contractors stress competition in awarding subcontracts and establish a common definition of competition to ensure consistent application and reporting among operating contractors. In developing this definition, DOE should consider the requirements of federal procurement statutes and regulations.
Closed – Implemented
DOE issued a rulemaking which it believed was responsive to this recommendation; however, GAO believes the rulemaking was not specific enough to be responsive. In a March 10, 1989, letter to the Subcommittee, DOE restated its position that the revised regulation provides adequate guidance on how competition should be achieved by their contractors.
Department of Energy The Secretary of Energy should ensure that DOE defense-related operating contractors stress competition in awarding subcontracts and enforce the DOE procedure that the DOE operating contractors publish notices in the Commerce Business Daily for all proposed procurements over $100,000 with certain exceptions, as specified in the Federal Acquisition Regulation.
Closed – Not Implemented
DOE altered its regulation to delete the DOE requirement that contractors publish notices in Commerce Business Daily for certain procurements. DOE stated that this requirement was removed because the contractors were able to achieve the required level of participation by small businesses without publishing procurements in the Daily.
Department of Energy The Secretary of Energy should ensure that DOE defense-related operating contractors stress competition in awarding subcontracts and establish standard procedures for operating contractors to follow in seeking to obtain competition, including requirements to conduct and document thorough market searches. In addition, the Secretary should establish a task force to study whether or not the operating contractors' administrative costs of extending the requirement for publishing notices to procurements between $25,000 to $100,000 outweigh the benefits resulting from increased competition.
Closed – Not Implemented
DOE disagreed with this recommendation for the reasons cited for removing the requirement for procurements over $100,000. GAO believes this is a key way of ensuring full and effective competition.
Department of Energy The Secretary of Energy should ensure that DOE defense-related operating contractors stress competition in awarding subcontracts and regularly review contractors' use of B-items and integrated contractor orders to ensure that the noncompetitive status of procurements that are exempted from competition is justified.
Closed – Implemented
DOE agreed with this recommendation as it pertains to B-items and has taken action to implement it. But DOE disagreed regarding integrated contractor orders (ICO), stating that its procedures allow oversight of such orders. GAO pointed out that the 1985 procurement system review at one contractor did not cover ICO. DOE stated that this was a mistake and that ICO were examined in the 1988 review.
Department of Energy The Secretary of Energy should develop uniform, minimum anti-kickback procedures to be used in implementing the Anti-Kickback Enforcement Act of 1986. These procedures should be consistent with the government-wide procedures being developed by the General Services Administration and expeditiously incorporated into DOE defense-related operating contracts.
Closed – Not Implemented
DOE stated that the procedures described in the Federal Acquisition Regulation were adequate to fully comply with the act, and that each contractor should have the latitude to institute its own standards of conduct. GAO believes that DOE should prescribe mandatory, uniform, minimum procedures.
Department of Energy The Secretary of Energy should require contractors to implement practices consistent with the Prompt Payment Act and maintain records to allow evaluation of their practices.
Closed – Not Implemented
DOE stated that: (1) contractors are not required to follow the Prompt Payment Act; and (2) the small interest penalties involved do not warrant any action. GAO acknowledged that the act does not apply to contractors and that the interest penalties were small. GAO pointed out that, nevertheless, competition could be enhanced if DOE instituted a prompt payment provision for contractors.
Department of Energy The Secretary of Energy should require DOE operations office managers to evaluate contractor payment practices as part of their contractor procurement system reviews. This would include follow-up of any promised corrective actions.
Closed – Not Implemented
DOE, in a March 10, 1989, letter to the Subcommittee disagreed that further review is needed. They believe adequate review is provided by the continuing management oversight by the Operations Office, OIG reviews, and annual internal audits by the contractor. GAO believes that the recommendation has merit because of the late payments and contractors that took discounts after the period expired.
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Topics

Government Operations
Competitive procurementDefense industryDefense procurementDepartment of Defense contractorsKickbacksMilitary procurementNuclear weaponsProcurementSubcontractingPublishing