Report No. DODIG‑2021‑077 U.S. Department of Defense InspectorAPRIL 21, 2021 General Audit of Other Transactions Awarded Through Consortiums INTEGRITY INDEPENDENCE EXCELLENCE Audit of Other Transactions Awarded Through Consortiums Results in Brief April 21, 2021 Objective Finding The objective of this audit is to determine DoD contracting personnel did not always plan and execute whether the DoD planned and executed OTs awarded through consortiums in accordance with OT laws other transactions (OTs) awarded through and regulations. Specifically, of the 13 base OT awards we consortiums in accordance with applicable reviewed, valued at $24.6 billion, DoD contracting personnel other transactional authority laws and did not: regulations. We reviewed a non‑statistical • properly track OTs awarded through consortiums and sample of 13 base OT awards, valued did not have an accurate count of OTs and associated at $24.6 billion that were active in dollar values because the Federal Procurement Data FYs 2018‑2019. System‑Next Generation was not set up to track Background consortium OTs or individual consortium projects and there was no guidance on how to award the projects to a consortium; According to the United States Code (U.S.C.), the DoD can enter into transactions other • consistently award OTs in accordance with applicable than procurement contracts, grants, or laws and regulations because there is little guidance or cooperative agreements for basic, applied, training on awarding consortium OTs; or or advanced research. OT authorities give • have a consistent basis to negotiate CMO fees because the DoD the flexibility necessary to adopt there was no guidance in place for establishing and incorporate business practices that these fees. reflect commercial industry standards and best practices into its award In addition, DoD contracting personnel did not ensure the instruments. OTs provide the DoD with security of controlled or restricted information being sent technology solutions from traditional to the consortium because DoD contracting personnel relied and non‑traditional defense contractors. on the CMOs to vet consortium members and ensure proper The DoD can award OTs through a safeguarding of controlled and restricted data. Further, consortium (two or more individuals, the DoD did not require consortium members to register companies, or organizations), to allow in the System for Award Management (SAM). Additionally, the DoD and industry to communicate in DoD personnel were not performing security reviews of one forum. A Consortium Management cumulative technical information provided to consortium Organization (CMO) acts as the consortium’s members, and instead only performed security reviews on a single point of contact and manages its per‑project basis. membership. Usually, the DoD awards a As a result, DoD officials do not have access to important base OT agreement to a CMO, selects a information associated with OTs awarded through consortiums, member to perform a project, and awards such as which contractor received the OT award and the the project to the CMO. The CMO enters specific costs associated with funded OT projects. Without into a separate agreement with the member this information, the DoD does not have the necessary selected to perform the project. The Office oversight of the projects it is funding, which may hinder its of the Secretary of Defense requires ability to make important real‑time decisions that enhance contracting personnel to track OTs in the mission effectiveness. Federal Procurement Data System‑Next Generation database. i DODIG‑2021‑077 (Project No. D2019‑D000AX‑0203.000) │ Audit of Other Transactions Awarded Through Consortiums Results in Brief Finding (cont’d) Additionally, the DoD may not always obtain the best • Develop procedures to require security reviews of value or properly apply OT requirements to ensure DoD the aggregate of solicitation information provided Components are responsibly investing in technologies to members and SAM checks of individual that produce longstanding capabilities to support members prior to project award. lethality within its current funding. Furthermore, not Management Comments properly protecting sensitive prototype data could increase risk to our national security. and Our Response Recommendations The Defense Pricing and Contracting Principal Director agreed with 12 of the 13 recommendations and We recommend that the Principal Director, Defense partially agreed with one recommendation, stating Pricing and Contracting: that Defense Pricing and Contracting will update the • Develop policies for awarding and tracking OTs OT Guide to address the recommendations. Management when using a consortium and coordinate with the addressed all specifics of the recommendations and the General Services Administration to update the recommendations are resolved but will remain open. Federal Procurement Data System‑Next Generation We will close the recommendations when we verify that to accurately capture OT data. the Principal Director has implemented the corrective • Reinforce guidelines or provide best practices to action plans. ensure OTs awarded through a consortium use Although not required to comment, the Director competition to the maximum extent practicable, of Policy, Deputy Assistant of the Secretary of the and require contracting personnel to maintain Navy (Procurement) stated that the Marine Corps documentation for major OT‑related decisions. market research and review of consortiums that could • Clarify policy for determining the approval meet their requirement provided a reasonable basis for level required for project awards when using not conducting formal competition, but they do not take consortiums, and establish a process or best exception to the report conclusions. We disagree with practice to address protests. the Director’s response that market research provides a • Establish DoD‑level training for awarding OTs reasonable basis for not conducting formal competition. through a consortium and a DoD‑level agreement The market research showed that there were enough officer delegation and warrant process. qualified contractors for competition, but contracting personnel chose not to compete the agreement. • Implement guidelines or best practices for contracting personnel to consider when Please see the Recommendations Table on the next page negotiating consortium management fees. for the status of recommendations. • Establish controls to ensure proper vetting of consortium members and dissemination of solicitation information only to members with the proper security clearance. ii │ DODIG‑2021‑077 (Project No. D2019‑D000AX‑0203.000) Recommendations Table Recommendations Recommendations Recommendations Management Unresolved Resolved Closed 1.a, 1.b, 1.c, 1.d, 1.e, Principal Director, Defense Pricing None 1.f, 1.g, 1.h, 1.i, 1.j, None and Contracting 1.k, 1.l, 1.m Please provide Management Comments by May 21, 2021. Note: The following categories are used to describe agency management’s comments to individual recommendations. • Unresolved – Management has not agreed to implement the recommendation or has not proposed actions that will address the recommendation. • Resolved – Management agreed to implement the recommendation or has proposed actions that will address the underlying finding that generated the recommendation. • Closed – OIG verified that the agreed upon corrective actions were implemented. iii DODIG‑2021‑077 (Project No. D2019‑D000AX‑0203.000) │ INSPECTOR GENERAL DEPARTMENT OF DEFENSE 4800 MARK CENTER DRIVE ALEXANDRIA, VIRGINIA 22350‑1500 April 21, 2021 MEMORANDUM FOR UNDER SECRETARY OF DEFENSE FOR ACQUISTION AND SUSTAINMENT UNDER SECRETARY OF DEFENSE FOR POLICY SUBJECT: Audit of Other Transactions Awarded Through Consortiums (Report No. DODIG‑2021‑077) This final report provides the results of the DoD Office of Inspector General’s audit. We previously provided copies of the draft report and requested written comments on the recommendations. We considered management’s comments on the draft report when preparing the final report. These comments are included in the report. The Defense Pricing and Contracting Principal Director agreed to address all the recommendations presented in the report; therefore, we consider the recommendations resolved and open. As described in the Recommendations, Management Comments, and Our Response section of this report, we will close the recommendations when you provide us documentation showing that all agreed‑upon actions to implement the recommendations are completed. Therefore, please provide us within 30 days your response concerning specific actions in process or completed on the recommendations. Send your response to either [email protected] if unclassified or [email protected] if classified SECRET. If you have any questions, please contact me at . Theresa S. Hull Assistant Inspector General for Audit Acquisition, Contracting, and Sustainment v DODIG‑2021‑077 │ Contents Introduction ........................................................................................................................................................................................................................... Objective 1 ................................................................................................................................................................................................................... Background 1 ......................................................................................................................................................................