July 14, 1998
W
| TO: |
G/General Counsel J/Acting Associate Administrator for Management Systems and Facilities George C. Marshall Space Flight Center Attn: DA01/Director
| FROM: |
W/Assistant Inspector General for Inspections, Administrative Investigations, and Assessments
|
SUBJECT: | Assessment of Property Disposal Outsourcing, Redacted Report(1) |
This report outlines issues and our recommendations regarding the pilot property disposal outsourcing program at the Marshall Space Flight Center (MSFC).
INTRODUCTION
In September 1997, the Office of Inspector General (OIG) received
a complaint alleging that the contractor responsible for property
disposal was not complying with the Federal Property Management
Regulations (FPMR).(2) In response, we
conducted an inquiry into the allegation at NASA Headquarters (HQ) and
MSFC. We subsequently expanded our efforts to an overall assessment of the
pilot property disposal process at MSFC.
NASA management is responsible for effective and efficient logistics
management functions, including property disposal. Ensuring compliance
with property laws, rules, and regulations is a significant management
control and an ongoing management responsibility.
BACKGROUND
Formerly, the General Services Administration (GSA) sold most
of MSFC's excess property. In 1994, GSA changed the FPMR to allow
agencies to conduct or contract for the sale of their own property
(41 CFR 101-45.103-1). As regulated in 41 CFR 101-45.103-2, the
agencies must conduct the sales according to the provisions in
41 CFR 101-45 and 41 CFR 101-46. That regulation also states
that agencies conducting excess property sales must also issue
internal procedures, "to ensure compliance and uniformity
and to protect the integrity of the sales process."
In February 1996, MSFC conducted a feasibility study of contracting
out the sales of its excess property. As part of the study, logistics
management officials sought ways to re-engineer the property disposal
process at MSFC. They benchmarked how other government agencies
and private entities performed the function, identified the advantages
and disadvantages of outsourcing, and subsequently recommended
commercial outsourcing.
NASA HQ logistics management officials approved the implementation
of a pilot program for property disposal outsourcing at MSFC.
However, they cautioned that MSFC would have to implement the
program in compliance with the FPMR. Otherwise, MFSC would have
to request a waiver from the regulations.
On June 9, 1997, MSFC outsourced property disposal with the award
of a fixed-price incentive contract, with a 3-year base period
and a 2-year option to Bentley's.(3) The
fixed price for the base period is $3,056,694 ($1,018,898 per year). The
incentive fee allows the contractor to retain 34.5 percent of gross sales
for general property and 9.5 percent of gross sales for individual
high dollar items.(4)
The contract requires sales be conducted in compliance with property
laws, rules, and regulations. Specifically, the Performance Work
Statement, Section 1.6, Sales, states,
The contractor shall be responsible for identifying and complying
with all applicable laws, rules and regulations regarding the
sale of Government surplus property including, but not limited
to, the Federal Property and Administrative Services Act of 1949,
as amended, and the Federal Property Management Regulations at
41 CFR 101.45. The contractor shall also be responsible for ensuring
that successful buyers are in compliance with such laws, rules
and regulations prior to authorizing release of property.
The Contracting Officer's Technical Representative (COTR) is responsible
for ensuring the contractor complies with the defined Statement
of Work or specifications included in the contract.
The OIG commends management for examining innovative ways of performing
the property disposal function at MSFC. However, management should
address the following issues to ensure effective and efficient
logistics management.
ISSUES
Bentley's is not complying with contract terms because it is not
conducting sales in accordance with the FPMR. For example, a
Sales Contracting Officer (SCO) was not present at three Bentley's
sales events. An SCO obligates the Government in the release
of property, and awards of property are valid only if made by
an appointed SCO (See Appendix A for more specific information).
Although Bentley's practices do not parallel the FPMR provisions,
the COTR did not advise the Contracting Officer of this deviation
from the contract. The COTR and a logistics management official
both advised us that Bentley's uses commercial practices to conduct
the sales. The two officials also stated that they believe the
FPMR provisions are unduly burdensome and inefficient. In contrast,
they believed that the commercial practices result in enhanced
efficiency.
MSFC awarded the contract as a performance based contract (PBC).
A PBC describes the task to be accomplished but does not prescribe
how the contractor is to perform it. Accordingly, NASA contracted
with Bentley's to conduct the sales of excess MSFC property, and
Bentley's determined the method of sale. Although given the choice
of methods, Bentley's must conduct the sales according to the
established property laws, rules, and regulations.
B. Waiver Request
GSA requires any requests for deviations (hereafter referred to
as a waiver) from the FPMR be made in writing, with complete justification.
The Administrator of GSA, or designee, has the authority to grant
the waiver (41 CFR 101-45.001). NASA HQ is responsible for sending
Agency waiver requests to GSA.
MSFC logistics management officials did not submit a waiver request
to NASA HQ for the outsourcing pilot program. Some working-level
logistics management officials questioned the outsourcing pilot
program's compliance with regulations and suggested MSFC request
a waiver. However, their concerns were never appropriately addressed.
We documented that the COTR knew that a waiver request was necessary.
In a Memorandum for the Record, dated October 17, 1998, [sic]
the COTR referenced the waiver request (Appendix B). In a memorandum
to NASA HQ, Code MX, dated November 3, 1997, MSFC provided comments
to the draft NASA Procedures and Guidelines (NPG) 4300, Personal
Property Disposal Manual.(5) These
comments recognize that GSA
must issue a waiver regarding use of the Standard Form 114C, Sale
of Government Property-General Sale Terms and Conditions. In
electronic mail messages exchanged in December, 1997, the COTR
discussed concerns about the pilot with MSFC's Office of the Chief
Counsel (OCC).
C. Management Assessment
The contract with Bentley's has been in effect for over 6 months.
During that time, Bentley's has conducted two auctions and one
sealed-bid sale. These experiences probably provide a sufficient
basis for a mid-term assessment. The assessment should identify
enhancements and impediments, determine benefits and costs, and
summarize lessons learned from the effort. In addition, all relevant
areas, including the recycling program and the exchange sales
program, should be assessed to ensure compliance with laws, rules,
and regulations.(6)
D. Coordinated Legal Opinions
The draft NASA NPG 4300, Personal Property Disposal Manual,
is a guide to fulfill the policy in NASA Policy Directive
4300.1, NASA Personal Property Disposal Policy. The NPG
offers procedural guidance and encourages the Centers to customize
their disposal management procedures to meet their local requirements.
The draft NPG, however, notes that it serves as a supplement
to the Federal regulations and procedures for utilization, donation,
and sales, with which all Federal agencies must comply.
The MSFC provided a written legal opinion regarding these issues.
Although MSFC was not required to coordinate with the NASA HQ
Office of the General Counsel (OGC), we believe such coordination
would have been beneficial. Our opinion is that the HQ OGC should
review all such pilot programs (i.e., those which are piloted
for possible use throughout the Agency) to ensure compliance with
Agency policy.
E. Training
During the course of the MSFC outsourcing pilot, the COTR of the
contract received no formal training on the Federal disposal process.
In-depth knowledge of the disposal process would make the COTR
more effective in monitoring the contract and surveillance of
Bentley's performance. During the same period, the Alternate
COTR for the pilot program did not receive formal training on
the responsibilities associated with the position of COTR. Such
training would have provided information and background to make the
alternate COTR more effective in the administration of the
contract.(7)
RECOMMENDATIONS
To improve the property disposal outsourcing pilot program, we
believe MSFC management should implement the following recommendations:
Recommendation 1. Address noncompliance
issues, including those identified in Appendix A of this report.
Recommendation 2. Submit a request for a
waiver to NASA HQ, Code J.
Recommendation 3. Perform a management assessment
of the property disposal outsourcing pilot program for the activities
to date.
Recommendation 4. Ensure the MSFC Office
of Chief Counsel opinions on this pilot are consistent with Agency
policy by coordinating with the NASA Office of General Counsel,
and that similar future pilot processes are reviewed by the NASA
Office of General Counsel.
Recommendation 5. Provide appropriate formal
training to the incumbents of the COTR and Alternate COTR positions.
SUMMARY AND EVALUATION OF NASA MANAGEMENT'S RESPONSE
NASA's consolidated response to our draft report completely concurs
with recommendations 1, 2, 3, and 5. We believe that an OGC review
of such pilot programs will facilitate implementation at other
Centers and ensure consistency. We note that NASA believes a
more appropriate time for the OGC to address overall policy is
if Code J decides to expand the pilot program, and thus management
only partially concurs with recommendation 4. Our intent with
respect to recommendation 4 was to ensure consistent Agencywide
policies. Since MSFC's implementation of this pilot program,
another NASA Center is interested in conducting a similar program.
The response also includes clarifications from NASA HQ and MSFC.
NASA HQ noted that the Standard Form 114C, shown in Appendix
A, had been updated. We are including the updated version of
the form in the final report. MSFC noted that we cite a draft
NPG in the report. Our intent in doing this was to show that
guidance was circulating in draft form and to emphasize that the
Agency had knowledge of Federal requirements governing the process.
We request NASA management forward a copy of the detailed management
assessment, currently planned for August-September 1998, to the
OIG. NASA's complete response, dated June 5, 1998, is provided
as Appendix C.
CONCLUSION
NASA management is developing innovative methods for performing
logistics management functions. The property disposal outsourcing
pilot program is one example. We commend management's commitment
to improving the logistics management functions. But, NASA management
must ensure compliance with laws, rules, and regulations, or request
the appropriate waiver before proceeding. We believe that the
lessons learned from this pilot program will enhance similar innovative
processes.
If you have any questions, please contact Ms. Pamela Withrow at
757-864-3261, Ms. Ywanda Gamble at 202-358-2056, or me at 202-358-2572.
[original signed by]
David M. Cushing
(3) Enclosures
Distribution
Distribution
National Aeronautics and Space Administration (NASA) Officials-In-Charge
A/Administrator
AD/Acting Deputy Administrator
AT/Associate Deputy Administrator (Technical)
B/Chief Financial Officer
H/Associate Administrator for Procurement
L/Associate Administrator for Legislative Affairs
M/Associate Administrator for Space Flight
P/Associate Administrator for Public Affairs
General Services Administration
Redacted Report Version
Chairman and Ranking Minority Member of Each of the Following
Congressional Committees and Subcommittees:
Redacted Report Version
Senate Committee on Appropriations
Senate Subcommittee on VA-HUD-Independent Agencies
Senate Committee on Commerce, Science and Transportation
Senate Subcommittee on Science, Technology and Space
Senate Committee on Government Affairs
House Committee on Appropriations
House Subcommittee on VA-HUD-Independent Agencies
House Committee on Government Reform and Oversight
House Subcommittee on National Security, International Affairs, and Criminal Justice
House Committee on Science
House Subcommittee on Space and Aeronautics
Footnotes
1. We have redacted materials which reflect attorney-client communications. We also omitted an exhibit in which various NASA personnel comment on draft property disposal policies.
2. The FPMR is published at 41 CFR, Chapter 101.
3. The contract's effective date is June 16, 1997.
4. Individual high dollar items are those appraised at $50,000 each or above.
5. The COTR and alternate COTR are listed as points-of-contact.