The Service has undertaken a complete redesign and modernization of its computer-based information processing system. To assist with the modernization efforts, the Service is soliciting a PRIME contractor and another Federally Funded Research and Development center (FFRDc) contractor to manage the overall modernization efforts. By establishing a FFRDc, the Service can obtain technical assistance without any organizational conflicts of interest, real or apparent.

The PRIME contract and the new FFRDc contract will be used in conjunction with several other contracts to implement the planned modernization. The PRIME contractor will implement the modernization blueprint, and the new FFRDc contractor will validate the approach of the PRIME contractor to ensure it is consistent with the modernization blueprint.

The overall objective of this review was to assess the effectiveness of the solicitation process. Audit work was performed during the period of January 1998 through June 1998 in the National Office.

Although the Service is soliciting contractors to assist with its modernization efforts, we determined additional emphasis is needed to define the interrelated roles of the various contractors and ensure all contractors remain free from potential conflicts of interest.

The roles and responsibilities of the major contractors contributing to the modernization efforts have not been fully defined. Management’s indecision on contractor responsibilities resulted in changes to the new FFRDc solicitation and delayed contract award 18 months from the original target date.

The delays have impacted the initial purpose of the new FFRDc contract. Originally, the new FFRDc was to be involved in the PRIME solicitation. However, due to the delays in awarding the new FFRDc contract, the solicitation was amended to remove all references to the PRIME solicitation. Without identifying each contractor’s role in the effort, the Service is at risk of duplicating efforts, incurring additional costs, not receiving its anticipated outcomes, and delaying the modernization efforts.

Procurement officials do not have sufficient measures for ensuring the FFRDc remains free from organizational conflicts of interest. currently, the FFRDc contractor signs a statement agreeing to maintain its objectivity and independence. However, Procurement does not validate the contractor’s compliance with this statement.

Although the selected contractor’s policy and procedures will be incorporated into the contract, this does not ensure freedom from organizational conflicts of interest. We believe a periodic validation of the FFRDc’s compliance with its internal policies and procedures needs to be implemented. The need for the FFRDc contractor to be impartial is vital because during the 15-year life of the multi-billion dollar PRIME contract, the FFRDc contractor will be evaluating the PRIME’s performance and providing recommendations. If the FFRDc is not free from conflicts of interest, the Service cannot rely upon the evaluations and recommendations provided by the FFRDc.

The following summarizes the specific recommendations contained in this report:

• Information Systems management needs to clearly define the responsibilities of all contractors involved in the modernization efforts, as well as the interdependencies between the various contracts. Each contractor's responsibilities should be sufficiently defined to assure the work of the various contractors will not overlap.
• Procurement personnel should periodically validate the FFRDc’s effectiveness in maintaining its freedom from organizational conflicts of interest, including a review of the other agencies or organizations which utilize the FFRDc.
• Management’s Response: Management agreed with the facts cited in the report and is taking the appropriate corrective actions. Portions of the management response related to each recommendation are included in the report. Attachment II contains the complete text of the management response.