AID-Financed Procurement:

Allegations of Irregularities in the Procurement of an Oil Drilling Chemical

NSIAD-90-41: Published: Dec 15, 1989. Publicly Released: Jan 23, 1990.

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Harold J. Johnson, Jr
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Pursuant to a congressional request, GAO reviewed the quality of an oil-drilling product (CELTROL-LV) that a U.S. firm supplied to Jordan and Pakistan under the Agency for International Development's (AID) Commodity Import Program, focusing on another U.S. firm's allegations that the contractor failed to comply with the contract specifications or AID source and origin regulations.

GAO found that: (1) Jordan tested the product and found that it met the contract specifications and AID source and origin requirements; (2) the awardee offered to have the product tested before shipment to Pakistan, and a testing company certified that it had witnessed the awardee's testing, but did not certify that the product met all of Pakistan's contract specifications; (3) AID incorrectly concluded that the certification meant that the shipment met all specifications and approved the Pakistan contract; (4) although Pakistan was not concerned about product compliance with four additional specifications, AID rules applicable to the Commodity Import Program required conformance to all contract specifications; (5) although one product component was of foreign origin, the dollar value of that component was less than half of the total manufacturing costs, in accordance with AID source requirements; and (6) AID did not have written procedures for investigating allegations of noncompliance, since it generally relied on host countries to investigate such matters.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The Government of Pakistan informed AID that it was satisfied with the product received. AID conducted a price analysis and found no discrepancies. This contract was subsequently closed-out with no price adjustment being sought.

    Recommendation: Because Messina has already delivered the CELTROL-LV to the Government of Pakistan under the contract and the product is in use, the Administrator, AID, should direct the AID Mission Director in Pakistan to consider during the contract close-out that two contract specifications were not met and to determine whether AID should seek an adjustment from the supplier for providing a product that did not meet specifications.

    Agency Affected: United States Agency for International Development


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