Executive Summary

Objectives and Scope

Background

Results

Detailed Objectives and Scope of Review

Management’s Response

The century Date change (cDc) Project Office has secured System Research and Applications (SRA) and Science Applications International corporation (SAIc) contractors to provide services and products to support the objectives of its Year 2000 conversion efforts. The cDc Project Office has assigned work to each contractor, which is in line with the tasks authorized in the respective contracts. However, we were unable to determine whether the cDc Project Office had effectively utilized contractor support in furthering its Year 2000 conversion efforts.

Due to the lack of adequate documentation maintained by the cDc Project Office, we were unable to fully determine the extent of work assigned, services and products provided, and support for hours invoiced by the contractors. Because contractors were secured by term task orders, there have been varying interpretations about required transaction documentation and accountability of contractor activities. Improved controls over contractor activity will provide more accountability and consistency in the daily administration of contractor work; help in objectively evaluating contractor performance; provide evidence of the effective and efficient utilization of resources; and, demonstrate contributions toward project decision making and goal accomplishment.

The overall objective for this audit was to determine whether the cDc Project Office is effectively utilizing contractor resources to obtain services and products, which support the objectives of the Year 2000 conversion efforts.

We determined that the task orders issued to SRA and SAIc establish, in general terms, the work required by the cDc Project Office which should help them to achieve their project goals. We found that work contracted with SRA and SAIc agrees with the written task orders intended to help facilitate the Infrastructure Strategy and the Enterprise Inventory/Analysis and Validation efforts.

Adequate documentation exists over tasking work to and receiving products from SRA. Further, the contracting Officer’s Technical Representative (cOTR) provided proper administrative oversight and maintained copies and/or access to products produced. In contrast, however, the same level of administrative oversight was not maintained over the tasking and monitoring of work assigned to SAIc. For instance:

• Work requests did not: capture the extent of work being tasked; clearly describe the services or products to be provided; specify product acceptance requirements; or, specify product due dates.
• contractor activities were not always well documented by the cDc Project Office to substantiate hours invoiced to the Service.

In addition, there is not an adequate separation of duties between individuals authorized to request, approve, and accept resulting SAIc services and products. An adequate separation of duties between the Program Manager (PM), cOTR and Technical Points of contact (TPOc) is essential to ensure activities under this level-of-effort contract are properly administered.

The cDc Project Office should follow Federal and Service guidelines to strengthen administrative controls over contracts. Specifically, we recommend that the cDc Project Office:

• Utilize completion task orders wherever possible to cover definitive and repetitive tasks.
• Ensure work requests are properly approved and clearly define the specific products or services contractors are tasked to provide.
• Use receipt and disposition documentation to account for products or services.
• Periodically obtain time reports for vendor personnel and verify a sample of hours-billed on vendor invoices and reconcile with actual hours worked.
• Establish an adequate separation of duties whereby distinct individuals control authorizing, processing and reviewing activities.

Management’s Response: Management agreed with most findings and recommendations in the report and will take the following action. The cDc Project Office and Procurement will review existing tasks to identify any additional work that can be performed using completion task orders. The cDc Project Office and Procurement will also review the processes for defining desired results from contractors and the approval process; identifying any changes to be made and due dates for each change. Further, the cDc Project Office will prepare a monthly report detailing contractor accomplishments.

Although management did not agree that a verification of vendor time reports should be done unless fraud or abuse is suspected, they did state that improved documentation will serve as a tool in certifying that the number of hours recorded should be paid. In addition, the final audit done at the end of each task order will thoroughly examine time cards of vendor personnel.

In addition, management did not agree with Internal Audit’s recommendation of the separation of duties among individuals authorizing, processing and reviewing contractor activities. Management indicated that all of these functions are reserved exclusively for the contracting Officer (cO) who in turn delegates the duties. The cO often delegates these duties to the cOTR and, as such, separating these duties would cause inefficiencies, duplication of efforts, and confusion about responsibilities.

Internal Audit continues to believe that an adequate separation of duties among individuals within the cDc Project Office must be established. Failure to do so adversely affects the ability of the cOTR to effectively represent Procurement in overseeing contractor activity.

The overall objective for this audit was to determine whether the century Date change (cDc) Project Office is effectively utilizing contractor resources to obtain services and products which support the objectives of the Project Office’s Year 2000 conversion efforts. We conducted our review from July 1997 to January 1998 in the cDc Project Office within the Office of the Associate commissioner for Modernization/chief Information Officer. Audit work was conducted in accordance with generally accepted government auditing standards. The detailed audit objectives and scope of review can be found in Attachment I.

The cDc Project Office’s Year 2000 Deployment Strategy is comprised of four interdependent components: Infrastructure, Enterprise Inventory/Analysis, Application Upgrade Deployment, and Validation. These four areas make up the process for ensuring that all IRS systems are identified, inventoried, analyzed, converted and tested to successfully operate in the Year 2000.

Systems Research and Applications (SRA) was contracted to support the Infrastructure Strategy by providing program and project organizational structures, methods, tools and the environment necessary for century date change activities. Science Applications International corporation (SAIc) was engaged to support the Enterprise Inventory/Analysis and Validation efforts. The Application Upgrade Deployment component was not a part of this review.

The services and products provided by SRA and SAIc were authorized through term, level-of-effort contracts (task orders) issued against the Treasury Information Processing Support Services (TIPSS) contract. At the time of our review, the cDc Project Office had issued four task orders designed to support their efforts. The term task orders were initially issued on July 5, 1996, with SAIc, and July 24, 1996, with SRA.

Under a term, level-of-effort contract, individual task orders establish and describe, at a high level, the tasks and sub-tasks that each contractor could be asked to perform. Work requests are subsequently issued to describe more fully the specific contractor tasks to be completed. These work requests should delineate the work to be performed; and also define required product(s), due date(s), and specific acceptance criteria. These work requests must then be signed and accepted by the contracting Officer Technical Representative (cOTR) and contractor representative before work is to begin.

The cDc Project Office has assigned work to each contractor that related to the tasks outlined in their respective contracts. However, we were unable to determine whether the cDc Project Office had effectively utilized contractor support in furthering its Year 2000 conversion efforts. Due to inadequate documentation maintained by the cDc Project Office, we were unable to fully determine the extent of work assigned, services and products provided, and support for hours invoiced by the contractors.

We further noted that an adequate separation of duties was not established within the cDc Project Office over those individuals authorized to request, assign, monitor and accept products and/or services from contractors. Improved controls over contractor activity will provide more accountability and consistency in the daily administration of contractor work. Improved controls will also ensure that adequate documentation is maintained which can be used to objectively evaluate contractor performance, provide evidence of the effective and efficient utilization of resources, and demonstrate contributions toward project decision making and goal accomplishment.

The assignment and monitoring of work tasked to SRA was well administered and documented by the cDc Project Office. We noted that work requests issued to SRA adequately described the services and products required by the cDc Project Office. In addition, there was not a turnover of cOTRs assigned to the SRA contract, which helped ensure proper administrative oversight. In contrast, however, we did not find the same degree of administrative oversight covering the assignment of work to and receipt of products from SAIc. We noted that:

• Improved documentation is necessary for monitoring and evaluating contractor activity, and demonstrating efficient use of resources.
• An adequate separation of duties should be established to ensure proper contract administration.

When these issues were discussed with Project Office management, we were informed that these administrative controls were not specifically required in work requests under a term task order. However, Federal and Service guidelines provide extensive requirements for transaction documentation and accountability similar to completion type task orders.

During our review, we were unable to determine whether the cDc Project Office provided adequate oversight and monitoring of SAIc contractor activity and therefore effectively used contractor resources in furthering its conversion efforts. Due to the lack of adequate documentation, we were unable to fully determine the extent of work assigned, the services and products provided, and support for hours invoiced by the contractors.

The task order format, used by the cDc Project Office to describe required tasks, provides a template for preparing subsequent work requests. This template includes essential information such as a description of the services and products to be provided along with the required due date for completion of the tasks assigned. This information is essential in helping to effectively administer contractor activity. However, we found that the cDc Project Office has not effectively utilized the task order work request format as designed when assigning tasks to SAIc. Work requests, prepared by the cDc Project Office, did not clearly define products or services that the SAIc contractor was tasked to provide. The cDc Project Office has interpreted the requirements for a term task order as not requiring a level of documented control when sound business practices would otherwise provide performance accountability. Specifically, we found adequate documentation lacking as noted in the following examples: 

• Task assignments made by the cDc Project Office were not always captured in work requests. For example, the cDc Project Office indicated that SAIc provides products that were a direct result of "hundreds" of undocumented, ad-hoc requests made by the cDc Project Office. Technical Points of contact (TPOc) and Project Office management work on-line, providing direction and technical information to assist SAIc employees in completing their assignments. As a result, the cOTR was not timely notified and work requests did not properly reflect SAIc tasks assigned.

• In preparing SAIc work requests, the cDc Project Office did not always describe, in sufficient detail, the products to be provided by the contractor. In 31 of 58 completed products listed in monthly SAIc status reports and provided to the cDc Project Office, the product descriptions did not clearly indicate the technical product requirements or which task order sub-task the product supported.

• Work requests did not always specify product due dates. Twenty-seven (48%) of the 56 products required by the first nine work requests (issued against SAIc’s second task order) did not indicate a due date.

In addition, contractor activities were not always well documented by the cDc Project Office to substantiate hours invoiced to the Service. Specifically, we found that:

• The cDc Project Office does not maintain adequate documentation necessary to monitor and objectively assess SAIc contractor performance. The cDc Project Office does not track or maintain a list of (delivered) SAIc products or their disposition. Additionally, copies of products are not centrally located or easily accessible within the cDc Project Office.

• cOTRs do not compile, tally or match timesheets to contractor invoices to validate the accuracy of the hours billed to the Service. As of October 3, 1997, over $1.8 million was expended for SAIc’s assistance in Year 2000 efforts.

When contracting for services that tend to affect Government decision making and support or influence policy development, an enhanced degree of management control and oversight should be provided.

 The "level-of-effort" ("hours") the contractor expends is what the cOTR accepts or rejects under a term contract. However, the cDc Project Office must maintain adequate documentation of work being performed on assigned products. The cOTR has the critical task of ensuring that the Service gets what it is paying for. The "hours" submitted on invoices consist of the preparation of products and thus the level-of-effort provided by the contractor. Without a means to track assigned tasks and disposition of products, the ability to accurately substantiate and accurately certify the hours submitted on invoices is uncertain. It is, therefore, imperative that contractor activities be well documented.

• Utilize completion task orders wherever possible to cover definitive and repetitive tasks.
• Ensure work requests clearly define the specific products or services contractors are tasked to provide and are approved before products are provided.
• Use receipt and disposition documentation to account for products. This documentation provides a means to evaluate contractor performance as well as substantiate completed work and its contribution towards project decision making.

Management’s Response: The cDc Project Office and Procurement will review the existing tasks to identify any additional work that can be performed using completion task orders. The cDc Project Office and Procurement will also review the processes for defining desired results from contractors and the approval process; identifying any changes to be made and due dates for each change. Further, the cDc Project Office will prepare a monthly report detailing contractor accomplishments.

Although management did not agree that a verification of vendor time reports should be done unless fraud or abuse is suspected, they did state that improved documentation will serve as a tool in certifying that the number of hours recorded should be paid. Proper documentation of time reports would make it unnecessary for such close scrutiny. In addition, the final audit done at the end of each task order will thoroughly examine time cards of vendor personnel.

An adequate separation of duties among individuals, within the cDc Project Office, who are authorized to request, approve and accept products and/or services from contractors does not exist. In the administration of the SAIc contract, the Program Manager (PM) supervises the cOTR, serves as the alternate cOTR and also serves as a TPOc. This structure places the cOTR in a subordinate position organizationally, but also responsible to oversee contract administration activities performed by the PM. As a result, the cOTR is limited in the ability to effectively represent Procurement in overseeing contractor activity.

In the role of TPOc, the PM can request products and services from SAIc and evaluate them for acceptance in support of the cOTR’s duties. This span of control allows the PM to both request and accept products or services.

We also found that, as a TPOc, the PM and other TPOcs work on-line, day-to-day with SAIc employees and verbally request deliverables, and provide technical information to assist SAIc employees in completing their assignments. The PM keeps abreast of the many requests, and routinely assists SAIc in prioritizing their daily assignments. SAIc is subject to relatively continuous supervision and control by the PM. In this operating environment however, the cOTR is sometimes notified of work assignments after they have been given to SAIc, in effect circumventing the procurement process.

The PM’s span of control was established by the cDc Project Manager to streamline contractor activities due to the urgency of Year 2000 conversion efforts. Project Office management explained this structure was established to expedite contractor activity.

A cOTR is responsible to represent Procurement in overseeing contractor activity, to include TPOc and PM involvement, as it relates to the contract. As such, the cOTR is responsible to ensure that products and services are clearly defined in work requests; to effectively monitor work assigned; and, to substantiate contractor effort billed on invoices.

An adequate separation of duties between the PM, cOTR and TPOcs is essential to ensure activities under this level-of-effort contract are properly administered. Due to the PM’s given span of control, there is no one independent of his control to determine whether activities performed by SAIc are or are not within the scope of the contract.

Management’s Response: Management did not agree stating that the functions of authorizing, processing, and reviewing contractor activities are reserved exclusively for the contracting Officer who in turn often delegates these duties to the cOTR. Therefore, separating these processes would cause inefficiencies, duplication of effort, and confusion about responsibilities.

Auditor’s comments: Internal Audit continues to believe that an adequate separation of duties among individuals within the cDc Project Office, who can request, approve and accept products or services must be established. Failure to do so adversely affects the ability of the cOTR to effectively represent Procurement in overseeing contractor activity.

Internal Audit Team:

Kathy MacMillan, Senior Internal Auditor

Tony Knox, Internal Auditor

Melvin Lindsey, Internal Auditor

Gerard Marini, Internal Auditor

The overall objective of this review was to determine whether the century Date change (cDc) Project Office is effectively utilizing both the Science Applications International corporation (SAIc) and System Research and Applications (SRA) contracts to obtain contracted products and services which meet the goals and objectives of the Year 2000 conversion effort.

1. Determined how the SAIc and SRA contracts provide support to the cDc Project Office needs. 

1. Identified the Project Office goals and objectives.
2. Examined the SAIc and SRA task orders and work requests to determine whether the scope of work to be performed supports the goals and objectives of the project.
3. Reviewed Federal requirements that provide guidance for project office administration of term versus completion type contracts, both which may be suitable for the cDc Project Office contracting needs.

II. Determined whether the task orders/work requests are being effectively utilized in order to meet the needs of the project as they relate to the cDc conversion effort.

1. Reviewed task orders and work requests for both contracts to identify whether they adequately describe the work to be performed.
2. Interviewed cDc Project Office staff to identify work being performed by SAIc and SRA.
3. Examined a sample of SAIc and SRA products to identify if the products coincide with the requirements provided for in the respective work requests, task orders and needs of the project.
4. Evaluated the effectiveness of the project monitoring of the work required in the task orders and work requests to ensure timely completion of products.  
5. Identified the status of products listed in work requests.

III. Evaluated whether the Service is receiving a "value-added" for services and products provided by SAIc and SRA. 

1. Identified whether there are procedures to review and accept work request products. 
2. Reviewed task orders and work requests to identify product specifications.  
3. Determined how products were used in satisfying the needs of the project.  
4. Attempted to identify the extent of SAIc and SRA products provided to the cDc Project Office and associate a cost-benefit, based on amounts invoiced, to substantiate the value-added by each contractor. 
5. Examined whether the elements of both contracts provide for any duplication.

Management's Response has been removed due to its size. To see the complete Response, please go to the Adobe PDF version of this report.