Resolution Trust Corporation: Preliminary Results of Western Storm Investigation and Related Contracting Deficiencies

GAO discussed its ongoing investigation into contracting practices at the Resolution Trust Corporation's (RTC) Western Regional Office, focusing on its Asset Stratification and Reconciliation Project (Western Storm) designed to reconcile the asset records of 92 failed thrifts with the region's accounting records. GAO noted that the region: (1) approved and paid contractor personnel for long work hours, but lacked the procedures to verify the validity of such charges; (2) did not put a cap on travel and per diem expenses or offer contractors any incentives to minimize travel-related costs; (3) lacked the internal controls to verify contractor travel vouchers; (4) did not perform any pilot studies to help define the project or develop a written plan or an adequate methodology for carrying out the project; (5) improperly issued the contract as a sole-source procurement; and (6) did not prepare a budget for each institution. GAO also noted that: (1) senior RTC officials did not require the region to write a project justification for Western Storm; (2) the contractor had an excessive gross profit margin of 21.6 percent; (3) RTC had little or no knowledge or expertise in the design and implementation of large contracting systems and did not to seek the advice of experts; (4) RTC has made some progress in correcting deficiencies in its contracting system, but has made little progress on implementing effective contractor oversight and contract administration; and (5) the RTC Contracting Activity Reporting System does not provide the performance information needed to adequately manage RTC contracting.