Subcontract Administration at Selected Department of Energy Management and Operating Contractors
July 31, 2015
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July 31, 2015
Subcontract Administration at Selected Department of Energy Management and Operating Contractors
The Department of Energy's (Department) management and operating (M&O) contractors have the responsibility to develop, implement, and maintain formal policies, practices, and procedures to be used in the award of subcontracts consistent with established Department and Federal acquisition regulations. Due to the large percentage of subcontract costs incurred by M&O contractors, and based on prior audit findings, we initiated this audit to determine whether selected M&O contractors administered their subcontracts in accordance with Departmental regulations. We selected for review the National Nuclear Security Administration's Kansas City Plant (Kansas City). In fiscal year (FY) 2013, Kansas City had a total of 18,026 subcontracts worth almost $241 million. We also visited the Office of Science's Thomas Jefferson National Accelerator Facility (Jefferson Lab), a facility that had a total of 1,743 subcontracts in FY 2013 with a value of almost $152 million. This audit is the first in a planned series of audits focusing on M&O contractor subcontract administration.
Nothing came to our attention to indicate that Kansas City and Jefferson Lab had not administered the subcontracts substantially in accordance with established policies and procedures and contract terms. While we did not discover material issues with administration of subcontracts we tested at Kansas City, we did observe that a certain class of subcontracts had been noncompetitively awarded. Specifically, we found that Kansas City awarded 8 of the 47 subcontracts we reviewed, or $10.2 million of $33.7 million in subcontracts, on a sole-source basis without specific justification.
The majority of the subcontract administration issues at Kansas City occurred due to a policy providing an exception from competition in instances when a Work for Others customer required the use of a specific subcontractor. Kansas City officials stated the use of a customer-directed subcontractor without competition was permissible because Kansas City's Procurement Work Instructions (Work Instructions) allowed such action. Specifically, the Work Instructions stated that an exception to subcontract competition is allowed when a customer directed, in writing, the use of a specific subcontractor. However, the Work Instructions appear to be inconsistent with (1) Department of Energy Acquisition Regulation (DEAR) requirements in the contract, DEAR 970.5217-1, Work for Others Program (Non-DOE Funded Work), which require M&O contractors to select the subcontractor and the work to be subcontracted for Work for Others customers, and (2) Federal Acquisition Regulation 52.244 5, Competition in Subcontracting, and DEAR 970.5244-1, Contractor Purchasing System, which require the use of competition.
Topic: Management & Administration