OIG | The Contracting Education Academy

April 8, 2019 By cs

OIG seeks voluntary refund despite contractor’s adherence to TINA requirements

DoD’s Office of Inspector General (OIG) for the Department of Defense (DoD) has recommended that a contractor be requested to provide a refund based on “excessive profits.”

On February 25, 2019, the Office of Inspector General (OIG) for the Department of Defense (DoD) issued an audit report analyzing the prices of spare aviation parts purchased by the Defense Logistics Agency (DLA) and the Army from TransDigm Group, Inc.

The audit was conducted in response to letters from certain Members of Congress, who had inquired whether the spare parts were sold at fair and reasonable prices and in compliance with the Truthful Cost or Pricing Data Act (formerly known as the Truth in Negotiations Act or TINA).

The OIG’s audit confirmed that both TransDigm and the responsible DoD contracting officers fully complied with the Act and related regulations governing the price negotiations, but the OIG nonetheless concluded that the contractor earned excess profit on the majority of parts sold. In a highly unusual move, the OIG recommended that DoD request a “voluntary refund” from TransDigm of its allegedly “excessive” profits, and the OIG also recommended a number of changes to statutory, regulatory, and administrative policies governing the provision of cost or pricing data.

The OIG’s Findings

At the request of U.S. Representatives Ro Khanna and Tim Ryan and Senator Elizabeth Warren, the OIG reviewed the price reasonableness of 47 spare aircraft parts DoD procured from TransDigm between January 2015 and January 2017. Using uncertified cost or pricing data that it collected during the audit, the OIG calculated the apparent profit realized by the contractor on the sale of each part, and concluded that the contractor realized “unreasonable” profits (defined as profits of greater than 15% in the report) on all but one of the parts. (The OIG arrived at the 15 percent profit percentage, in part, by looking at maximum profit percentages allowed in the FAR for three different types of contracts, none of which were fixed price.) The OIG applied this finding to a broader sampling of contracts held by TransDigm, and concluded that the contractor had earned $16.1 million in “excess profit” (i.e., profit over 15 percent) for the parts at issue.

The OIG concluded that a number of factors contributed to these supposedly “excessive” profits.

Keep reading this article at: https://www.insidegovernmentcontracts.com/2019/03/when-compliance-is-not-enough-oig-seeks-voluntary-refund-despite-contractors-adherence-to-tina-requirements/

April 3, 2019 By cs

ATF rushed sole-source contracts without market research, watchdog finds

In its efforts to meet small business contracting goals, the Bureau of Alcohol, Tobacco, Firearms and Explosives neglected proper market research and record-keeping before awarding sole-source contracts, a watchdog found.

“Proper documentation is necessary to show that ATF safeguarded federal funds, furthered the purpose of small business programs, and complied with sole-source contracting authorities,” wrote the Justice Department inspector general in a report released on March 14th.

“ATF did not maintain complete contract files and could not demonstrate that it had conducted required market research before awarding several sole-source contracts,” auditors found in a review of 16 sole-source contracts totaling $56 million to nine small businesses in 2016-2017.

Keep reading this article at: https://www.govexec.com/contracting/2019/03/atf-rushed-sole-source-contracts-without-market-research-watchdog-finds/155640/

March 14, 2019 By cs

IRS wasted $3.4 million on software it never used, watchdog says

IT management shortcomings led the IRS to waste millions of dollars on licenses and subscriptions for software agency officials never used, according to an internal watchdog.

Because it failed to follow federal acquisition requirements, the agency also deployed a software product that fell far short of its promised functionality, auditors said.

In a recent report, the Treasury Inspector General for Tax Administration found the IRS didn’t actively manage its IT assets or monitor the cost of the myriad software subscription and support packages used across the enterprise. As a result, the agency spent roughly $3.4 million between 2015 and 2017 on tools it didn’t need, auditors said.

They also found insufficient management caused the agency to lean too heavily on a separate package of software tools, which put it at risk of penalties and fines from the vendor, IBM.

Keep reading this article at: https://www.nextgov.com/it-modernization/2019/03/irs-wasted-34-million-software-it-never-used-watchdog-says/155247/

December 12, 2018 By cs

Oversight of U.S. military’s food suppliers called into question after fraud indictment

Executives from a company responsible for providing food and water for deployed U.S. troops in Afghanistan have been charged with defrauding the government and creating a fake construction site to overstate progress on an $8 billion contract, the Justice Department said in a recently filed indictment.

The allegations came four years after the company’s predecessor pleaded guilty to criminal charges that it inflated prices for basic items that it sold to the U.S. military. Both cases emphasize how the U.S. military has struggled to curb abuses of U.S. defense spending in America’s longest-running foreign war as the U.S. military presence in Afghanistan enters its 17th year, analysts said.

On Nov. 27, the Justice Department charged Abdul Huda Farouki, Mazen Farouki and Salah Maarouf — three Virginia residents who worked with a Dubai-based company called Anham Fzco — with defrauding the U.S. military under an estimated $8 billion military supply contract.

Keep reading this article at: https://www.washingtonpost.com/business/2018/12/08/oversight-us-militarys-food-suppliers-called-into-question-after-fraud-indictment/

Efforts by the General Services Administration to protect data gathered by its building lease support services providers got tangled in internal contracting rules, according to an inspector general report.

DoD’s Office of Inspector General (OIG) for the Department of Defense (DoD) has recommended that a contractor be requested to provide a refund based on “excessive profits.”

The OIG’s Findings

In its efforts to meet small business contracting goals, the Bureau of Alcohol, Tobacco, Firearms and Explosives neglected proper market research and record-keeping before awarding sole-source contracts, a watchdog found.

IT management shortcomings led the IRS to waste millions of dollars on licenses and subscriptions for software agency officials never used, according to an internal watchdog.

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