Summary

In response to a congressional request, GAO reviewed Department of Energy (DOE) contracts with Decision Planning Corporation (DPC) to determine whether the method used by DPC to compute overhead costs resulted in the Government's bearing a disproportionate share of indirect costs. In addition, GAO reviewed the history of the contracts, the effectiveness of DOE monitoring, and the propriety of contracting for the work rather than having it done by full-time DOE personnel.

Since 1977, DOE has awarded three cost-plus-fixed-fee contracts to DPC on the basis of its staff qualifications and corporate experience, with proposed cost receiving secondary consideration. DPC was initially selected to receive a fourth contract for management support services; however, the selection was withdrawn and revised proposals are being reevaluated after a bid protest was filed. GAO found that DPC did not calculate overhead rates per individual contract. When the first two contracts were awarded, DPC used a companywide, combined overhead and administrative rate to distribute its indirect costs. The indirect cost base included both employee and consultant labor costs. When the third contract was awarded, DPC segregated its indirect costs to an overhead rate applying only to DOE work; a separate overhead rate applying to non-DOE work; and an administrative rate applying to all work. GAO found that, even though these accounting procedures were not the most desirable, they were acceptable and DOE was not overcharged for indirect costs under these procedures. A GAO review indicated that DOE monitoring of DPC contracts was adequate and that the charges were proper. Furthermore, GAO found that the contracts did not violate Federal regulations concerning functions that must be conducted by Government employees, since DPC provided support services to DOE managers. Contrary to sound procurement practice, DOE on two occasions allowed DPC to begin work before a contract was formally executed, but steps have been taken to eliminate this practice.