This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
Recent United States federal government audits reveal ongoing weaknesses in contract administration and serve as a useful reminder to public institutions across all jurisdictions of the need to bolster contract oversight practices.
For example, in its April 2019 report entitled Lessons Learned from Office of Inspector General Audits Concerning the Review and Payment of Contractor Invoices Supporting Overseas Contingency Operations, the U.S. Department of Justice Office of the Inspector General found weak invoice approval practices in the Department of State’s overseas contracts. The report found that staffing shortages within the agencies “hampered their efforts to thoroughly review invoices” and that those agencies “were not fully prepared to monitor contractor performance, which increased the risk that the Department paid for services that did not meet contract requirements.” More specifically, the report found that “the use of cost reimbursable contracts had a significant effect on the workload of the invoice reviewers because of the complexity of the invoices.” The report made a series of recommendations to address these concerns, including improved training for staff responsible for reviewing contract invoices.
In its May 2022 report entitled Audit of the Department of State Management and Monitoring of Federal Assistance Awards to For-Profit Organizations, the U.S. Department of Justice Office of the Inspector General found that the Department of State did not always manage and monitor selected awards in accordance with contractual requirements. More specifically, the report found that contracting officers “did not consistently perform and document performance and financial monitoring, complete annual updates to risk assessments and monitoring plans, obtain audit reports, or conduct annual reviews when applicable.” Further, the report found flawed record-keeping practices, noting that “oversight personnel were maintaining key documentation in ‘unofficial’ award files”. These unofficial files included personal computer drives, shared drives, and bureau-specific systems, which was contrary to the Department of State policy requiring the use of the government system to maintain official award files. The report concluded that the primary reason for the deficiencies was the lack of oversight. The Inspector General advised the Department of State to develop a communications strategy to clarify contract oversight requirements and provide staff with better training in contract management procures.
Finally, in its June 2022 report entitled Audit of U.S. Army Base Operations and Security Support Services Contract Government-Furnished Property in Kuwait, the U.S. Department of Justice Office of the Inspector General found that the United States Army failed to maintain proper inventory records for assets managed by its contractor at a military base in Kuwait. As the report found, no records were kept when the assets were first transferred to the contractor and no written procedures were established to instruct contracting officers to conduct reconciliations between the Army’s inventory record and the contractor’s inventory record. Due to this lack of accountability, the report concluded that the Army’s and contractor’s inventory records differed by over 23,000 items, “which increased the risk of loss or theft of these items”. In fact, while the contractor self-reported $13.5 million in losses over the life of the contract, without accurate records, the Army could not verify that the contractor had reported all its losses. While the Inspector General advised the Army to reconcile those records and address the discrepancies, this may no longer be possible given the passage of time. The audit serves as another reminder of why oversight practices are important to ensure that contracts are properly managed in the first place.
