Scout’s Obsession with the GAO: Got a great deal, then don’t be such a dick
(Obsession explainedhere at inaugural edition)</pScout
If I were allowed to offer an alternative title to this GAO report it would be “Act like a Dick and Ya get Nicked: Lessons Learned by Contractors Padding their Travel Costs”
OK the real title is“Department of State Contract for Security Installation at Embassies” and what is interesting about this November 8 report is how it came about. The contract, held by a company named EmbSEC for installing and maintaining security equipment at US embassies, came under review by the GAO after a tip from their Fraud Line. The GAO decided to look into why this contract was awarded without competition, why the travel costs which are the major cost of the contract are firm and fixed-price and where the heck was the oversight.
The awarding of the contract without competition gets complicated and that info can be found after the jump. Let’s start with the aspect of this which garners the simplified wasteful big government headline treatment. The contract was fixed-priced which the GAO says usually places the greater risk on the contractor however in this case there were unintended consequences regarding…
Travel Costs:
Because travel is fixed-price and not cost-reimbursable, the government pays airfare and other associated travel costs for the number of travelers proposed for each task order, regardless of the actual costs the contractor incurs. According to our review of the contract file and discussions with State personnel, there have been instances where the contractor has proposed a number of travelers that turned out to be more than actually traveled, and the government has thus paid for trips that did not occur.For example, for work in Baghdad, Iraq, the contractor’s price proposal reflected 23 travelers, but only 10 actually traveled. For work in Tashkent, Uzbekistan, 12 travelers were proposed and only 5 traveled. In the case of Baghdad, a State official calculated that the government paid at least $380,000 more than incurred costs.
And Baggage Handling Fees:
Another issue related to travel costs pertains to excess baggage handling fees. These fees are intended to cover the contractor’s expenses associated with transporting equipment overseas. According to contractor representatives and State officials, the tools and equipment needed under this contract can be very large and bulky, requiring additional fees to transport them in and out of the countries of destination. The contractor’s proposals for 200 task orders between December 2003 and July 2005 reflected a fixed price per traveler for excess baggage fees that some State officials believed was too high. State paid this price until it requested information on actual costs, which turned out to be much less.An OBO official calculated that State overpaid $1.2 million during this 1 1/2 year period.
Yikes! That’s John Stossel material… Can‘t ya hear it—$1.2 million for shuffling Samsonite? Give me a break.
So this in part led contracting officials to call for an audit last year which never got under way due to a shortage of staff and “much of the [one] contracting officer’s time has been taken up with resolving disagreements with the contractor.” The GAO described the wrangling over travel costs as having become “contentious” when the contracting official attempted to “change travel to a cost-reimbursable expense.” In other words the contractor got pissy and greedy with their overlords about the contract. Some contractors just don’t know their place and given the sweetheart deal this firm fell into they ought to have quit while they were ahead.
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