Summary
The Pension Benefit Guaranty Corporation (PBGC) sought to address a backlog of hundreds of thousands of pending benefit determinations by contracting for services. However, PBGC has not linked its contracting decisions to longer-term strategic planning considerations. Also, PBGC's procurement planning and execution processes do not stimulate competition for contract awards and they do not have sufficient rationale for contracts awarded. PBGC also does not adequately monitor the performance of contractors in the field and has a weak quality assurance review process. The broader management issues and day-to-day operational problems that GAO identified in PBGC's contracting practices could affect its ability to efficiently and cost-effectively serve the financial needs of millions of pension plan participants. GAO summarized this report in testimony before Congress; see: Pension Benefit Guaranty Corporation: Contract Management Needs Improvement by Barbara D. Bovbjerg, Associate Director for Education, Workforce and Income Security Issues, before the Senate Special Committee on Small Business and the Senate Committee on Small Business. GAO/T-HEHS-00-199, Sept. 21 (15 pages).
GAO noted that: (1) PBGC contracting decisions and its organizational field structure have been heavily influenced by the need to service rapidly increasing workloads within the existing federal staffing limitations; (2) faced with a significant influx of large pension plan failures beginning in the mid-1980s, PBGC chose to contract for services rather than seeking additional federal staff during a period of government downsizing; (3) PBGC cannot be assured that it has a cost-beneficial mix of contractor and federal employees, as federal policy requires, and risk being unprepared for future workload changes as defined benefit pension plans and participants decline; (4) GAO identified weaknesses in PBGC's procurement planning and execution processes; (5) in procuring management services for several other field benefit administration (FBA) office contracts, PBGC should have done more to stimulate competition by conducting outreach and market research activities to identify additional potential offerors; (5) PBGC risks paying too much for contracted services and receiving inferior performance; (6) GAO identified weaknesses in PBGC's contractor oversight activities; (7) PBGC has taken a number of actions to improve its management of contractors, including automating and centralizing several functions previously handled in the field locations to allow contractors and their staff to focus primarily on processing benefit determinations; (8) however, PBGC does not centrally compile FBA-specific data essential for monitoring the performance of contractors in field locations; (9) GAO identified weaknesses in PBGC's quality assurance review process for these field offices, and in its policies and procedural guidance for PBGC employees responsible for monitoring contracts; (10) furthermore, GAO is concerned that the current organization placement of PBGC's Contracts and Controls Review Department, which provides audit and internal review services to PBGC related to contracting may affect its independence; (11) at present, this office is located within the PBGC component that is the second-largest user of contracted services and reports to its head; and (12) the broader management issues and day-to-day operational weaknesses that GAO identified in PBGC's contracting practices could affect its ability to efficiently and cost-effectively serve the financial needs of millions of pension plan participants.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
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Recommendations for Executive Action
Recommendation: To improve PBGC's management of its contract responsibilities, PBGC's executive director should: (a) conduct a comprehensive review of PBGC's future human capital needs, including the size of the workforce; (b) its deployment across the organization; and (c) the knowledge, skills, and abilities needed by PBGC. The results of this review should be used to better link staffing and contracting decisions to PBGC's long-term strategic planning process, consistent with the Government Performance and Results Act of 1993.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Implemented
Comments: PBGC engaged the National Academy of Public Administration (NAPA) to examine human capital issues and assist it in conducting a strategic workforce planning study. NAPA's report made specific recommendations and identified workforce knowledge, abilities, and skills requirements, as well as workforce competency gaps in six areas. NAPA's workforce model provided PBGC with a framework to assist in better assessing the needs for human capital, identify gaps in strategic planning efforts so PBGC could better meet changing workloads, and distribute workloads more effectively. As a result, PBGC developed strategies to (1) enhance recruitment, (2) develop a program to help staff have a "big picture" view of the agency, (3) establish a comprehensive project management and contract administration curriculum, (4) improve the succession management program, and (5) define the functions of PBGC's core and contingent workforces and establish criteria for outsourcing decisions.
Recommendation: To improve PBGC's management of its contract responsibilities, PBGC's executive director should address in PBGC's procurement process to ensure that contract award decisions best serve the needs of the government and plan participants, while fostering competition. This would include conducting market research as appropriate to determine whether other potential offerors exist and seeking opportunities for increasing competition for PBGC contracts that are now awarded on a sole-source basis.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Implemented
Comments: To improve competition, PBGC recently established a team with Procurement Department participation to analyze Customer Relations Management software needs and conduct market research, which will include visits to various contractor facilities. PBGC also established a similar team to address its Customer Service Center procurement needs. PBGC also broke out several requirements for Information Resource Management task order contracts and will compete them as separate contracts to allow other companies to submit offers. PBGC is also in the process of competing 9 of 10 field benefit administration (FBA) office contracts. Many FBA contracts were formerly sole source procurements and had never been subject to competition.
Recommendation: To improve PBGC's management of its contract responsibilities, PBGC's executive director should where appropriate, utilize more fixed-price contracts and fewer labor-hour payment arrangements consistent with best practices in performance-based contracting.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Implemented
Comments: PBGC agreed with this recommendation and noted that it should use more fixed-price contracts as appropriate. Since September 30, 2000, PBGC has awarded four fixed-price contracts. Three of the contracts were new procurements, while the fourth was renegotiated from a partial labor-hour arrangement to a fixed-price contract. A fifth contract was also converted by PBGC from a labor-hour payment arrangement to a cost plus fixed-fee arrangement.
Recommendation: To improve PBGC's management of its contract responsibilities, PBGC's executive director should revise the current organizational placement and reporting relationship of Contracts and Controls Review Department to promote objectivity and independence.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Implemented
Comments: PBGC engaged the National Academy of Public Administration to conduct a strategic workforce planning study. The organizational placement of the Contracts and Controls Review Department (CCRD) was one of the issues addressed in the study. As a result, PBGC implemented some organizational changes to address GAO's recommendation that it provide greater CCRD organizational independence. PBGC transferred responsibility of the Information Resources Management Department, the major contract component, from the Chief Financial Officer (CFO) to the Chief Technology Officer to reduce the amount of contract dollars associated with the CFO function. PBGC also acknowledged the need for independent contract audit oversight which will now be fulfilled by the PBGC's OIG. CCRD will no longer reference yellow book standards in its work supporting the contract officer in the award, administration, and settlement of PBGC contracts, and will no longer use the term "contract audit." CCRD will no longer perform contract evaluation services relating to contractors that provide services to the CFO, Financial Operations Department, or CCRD. In addition, PBGC would award contracts for "audit" services after consultation with the PBGC's OIG. Finally, PBGC is revising CCRD's mission and function statement and operating procedures to describe its new duties and coordinate respective functions with the OIG. In a September 2004 letter to GAO, PBGC and the OIG confirmed and laid out specific criteria governing their coordination.
Recommendation: To improve PBGC's management of its contract responsibilities, PBGC's executive director should strengthen policies and procedures for evaluating proposals by ensuring that review panels adequately document their contract award recommendations in accordance with PBGC's internal guidelines.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Implemented
Comments: After the start of GAO's review, PBGC issued a September 1999 policy revision, requiring that contract case files retain individual scores from technical panel members. However, weaknesses in case file documentation remained. In their comments to GAO's report recommendation, PBGC indicated that individual scores will continue to be retained in the case files, and that it would also ensure that other needed documentation is retained in the files to ensure that procurement decisions are thoroughly documented.
Recommendation: To improve PBGC's management of its contract responsibilities, PBGC's executive director should strengthen PBGC's contract oversight role by developing the capacity to centrally compile and monitor essential field office performance data. Such a system should provide the longitudinal data necessary to quickly measure and compare field office performance in regard to outputs, product quality, backlogs, and timeliness.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Implemented
Comments: PBGC's Insurance Operations Department is developing a centralized web site that allows for more effective field benefits administration oversight. The effort to better compile and monitor field performance data includes the ability to track PBGC issues and administrative actions, as well as work plan management.
Recommendation: To improve PBGC's management of its contract responsibilities, PBGC's executive director should address weaknesses in PBGC's field office performance review process to better ensure that benefit administration services contractors meet quality and accuracy requirements.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Implemented
Comments: The field office review function was moved to the division responsible for ensuring compliance with program procedures. The services of a consultant, experienced in internal control reviews, were used to conduct a risk assessment of the filed offices' processes and to identify program control objectives and inherent risks. According to PBGC, numerous enhancements were made to the review program. The new review has been pilot-tested and PBGC plans to complete three additional reviews by fiscal-year-end. The FBA review teams underwent an extensive 4-day training session to clarify review standards and gain a better understanding of conducting risk assessments and preparing supporting documentation.
Recommendation: To improve PBGC's management of its contract responsibilities, PBGC's executive director should develop a comprehensive set of procedural guidance for staff responsible for awarding contracts and monitoring contractor performance.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Implemented
Comments: PBGC has posted contract policy guidance on the Procurement Department's intranet site for staff responsible for awarding contracts and monitoring contractor performance.
