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Summary

Between October 2012 and September 2013, the Federal Highway Administration’s (FHWA) Office of Federal Lands Highways (FLH) awarded $305 million in contracts, which totaled 53 percent of FHWA’s fixed-price contracts. FLH relies on sealed bid contracting to award its road projects. The Federal Acquisition Regulation (FAR) requires contracting officers to determine whether offered prices are fair and reasonable prior to awarding contracts, and may reject bids when either total bid prices or line item prices are unreasonable. Price reasonableness determinations provide agency contracting personnel with information for evaluating bid proposals and promoting competition for Federal contracts. Given the importance of price reasonableness and FLH’s sizeable contract awards, we initiated this audit to determine whether FHWA’s policies, procedures, and practices meet Federal requirements for ensuring price reasonableness for FLH’s fixed price contracts. FHWA lacks adequate procedures and practices to ensure that contracting personnel thoroughly evaluate bid prices for FLH’s contracts. FHWA received multiple bids for the 13 FLH contracts we reviewed, but the winning bids differed from agency estimates—internally calculated project cost estimates—by as much as 20 percent above the estimate to as low as 39 percent below. In the absence of policies and procedures from FHWA, FLH’s three Divisions—Eastern, Central, and Western—each use their own informal practices for determining when and how to conduct bid evaluations.

We made two recommendations to assist FHWA in ensuring that FLH contracting personnel thoroughly evaluate bid prices for FLH’s contracts. FHWA concurred with one recommendation and partially concurred with the other, and provided appropriate planned actions and timeframes for both recommendations.