Probe of FAA Contracting Finds Waste
Saturday, September 23, 2006
A Federal Aviation Administration contracting program, initially hailed as a way to make the agency more efficient, was so poorly managed that it cost the government millions of dollars in overruns, according to a government investigative report and legislators who reviewed its conclusions. The FAA has disbanded the program.
The program was designed to allow the FAA to obtain services faster and cheaper by using 142 approved vendors.
But the FAA ran into major problems shortly after the program's inception in 2002 because contracts were supervised poorly, many were not put out for competitive bids and officials did not set proper labor rates, according to a report to be released Monday by the Transportation Department inspector general's office.
The report does not say precisely how much the FAA was overcharged by contractors but describes a variety of problems, including the hiring of former FAA employees by contractors.
Sen. Charles E. Grassley (R-Iowa), who requested the investigation, said the program's problems cost the government tens of millions of dollars.
"It's just outrageous how the FAA was not looking out for the taxpayers' dollars," Grassley said in an interview. "Three words would sum this up: absolutely no accountability."
FAA officials said they disbanded the program months ago and did what was necessary to resolve leftover problems.
The inspector general's report says the FAA never set standard labor rates for the program's contractors, forcing officials to negotiate them with each new contract. That caused officials to take twice as long as usual to award contracts.
The FAA also did not set labor qualifications for contractors, the report says. One contractor charged the FAA $35 an hour for the work of an administrative assistant. Four weeks later, it called the worker an analyst and raised her hourly rate to $71 without providing proof of her qualifications, the report says.
The inspector general estimated that labor costs alone could have created overruns of $24 million to $44 million if the program and the contracts been allowed to continue.
More than half the contracts were not put up for bids, the report says. The FAA is allowed to award sole-source contracts, but of eight such contracts reviewed by investigators, only one was found to have had "adequate justification."
The report says companies were eager to hire former FAA employees. One offered a finder's fee for such workers, and 21 percent of its employees had worked for the agency.
"While this practice does not violate any government regulations, it creates significant risks to FAA's ability to maintain arms-length relationships with its contractors when negotiating contract terms or overseeing contractor performance," the report says.
Sen. Tom Coburn (R-Okla.), who also pushed for the inspector general's investigation, said the hiring of former FAA employees by contractors troubled him.
"There is nothing wrong with hiring experienced people, but there is plenty wrong with hiring people and giving them a job they are not qualified to do," he said.
FAA officials said they took steps more than a year ago to address issues raised by the inspector general. They began requiring the agency's deputy administrator to review all no-bid contracts worth more than $1 million, and the chief financial officer began approving all contracts worth more than $10 million.
By March, the FAA had disbanded the program. The agency has put all but five of the remaining contracts up for bids. It also has set guidelines on how to deal with former FAA employees and relatives of current workers, officials said.
"We have dissolved this entire program," said Laura Brown, an FAA spokeswoman. "We have already taken many of the steps that the IG recommended, and as the IG noted, we have agreed to most of the recommendations and we are taking further actions in response" to the report.
The report does not identify the companies or the FAA officials involved in the contracts. A spokesman for the inspector general's office declined to provide such information, referring questions to the FAA.
The investigation began last year when Debra Srite, an FAA contracting officer, and an unidentified colleague approached auditors and Grassley to raise questions about a contract with Crown Consulting Inc., a District firm with 180 employees.
A government audit last year found that Crown overbilled the FAA by $56,317 over four months. The audit attributed much of the overbilling to Crown's exaggerating the qualifications of its employees.
The audit report said at least two Crown employees were not qualified to do the work for which Crown was billing the FAA. Crown officials could not be reached for comment last night.
Srite, who left the FAA a month ago because she said she felt pressure on the job after pointing out problems with Crown's contract, said she was pleased by the inspector general's report.
"They hit most of everything," Srite said in a telephone interview. She said she still wanted investigators to look into "a lot of property that is not accounted for."