Securities and Exchange Commission Should Improve Procurement Practices for Market Surveillance System Development

AFMD-81-17: Published: Mar 6, 1981. Publicly Released: Mar 6, 1981.

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As part of the continuing effort to achieve greator economy in contracting for Government goods and services, GAO reviewed the procurement practices used by the Securities and Exchange Commission (SEC) to obtain an automated market surveillance system. The computerized system will be used to support SEC market surveillance efforts which detect trading practices that may violate securities laws and regulations.

GAO found that the procurement practices of SEC may have permitted one firm to gain an advantage over other firms since: (1) top SEC officials discussed market surveillance problems at great length with representatives of the firm 3 months before the public request for proposals was made; (2) SEC subsequently awarded a contract to the firm to define and design its market surveillance system on the basis that the firm's proposal was considered to be the most responsive to the needs of SEC; (3) SEC did not use appropriate contract provisions to avoid the creation of an organizational conflict of interest, which could restrict competition for follow-on contracts; and (4) SEC failed to issue a required public notice of its intention to award the firm a noncompetitive contract to test the system's operations.

Recommendation for Executive Action

  1. Status:

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

    Recommendation: The Chairman of the Securities and Exchange Commission should comply with regulations governing procurements by Federal agencies. The Commission's procurement policies should be strengthened so that (1) all interested parties are given the same opportunity to obtain Commission contracts; (2) contract provisions do not permit an organizational conflict of interest which could limit competition for follow-on contracts; and (3) public notice detailing the Commission's needs is given before a noncompetitive contract is awarded.

    Agency Affected: United States Securities and Exchange Commission


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