|
INTRODUCTION
This report presents our financial audit and State
compliance examination for the year ended June 30, 2005.
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
LACK OF DOCUMENTATION IN
CONTRACT FILES
Department
contract files lacked basic information, such as individual scoring sheets,
documentation to support the award to a particular vendor based on criteria
delineated in the Request for Proposal (RFP), and other decision
documentation to adequately document the evaluation, selection and
contracting process. We reviewed ten
procurements awarded by the Department in FY05, totaling a maximum award amount
of $45 million. Among the conditions
noted by the auditors:
·
In 7 of 10 procurement files reviewed, we found no
evidence of individual scoring sheets.
October 2004 guidance from the Department of Central Management
Services states, "An evaluation form must be completed by each committee
member for each proposal. . ."
·
For the procurement of public relations services for
the Dan Ryan/Kingery Expressway Project, a Department official, who was not
on the Selection Committee, was involved in the selection process. For the same procurement, the Department
awarded the project to multiple vendors.
Each vendor had bid on the entire project and the Department made an
award to two vendors and each award exceeded the proposed costs that each had
originally bid to do the entire project.
·
For a procurement estimated at $900,000, the
Department could not locate the contract file or the working files for the
procurement.
·
For a procurement estimated at $625,000, the decision
recommendation lists two cost scenarios proposed by the winning vendor. However, neither scenario went into the
actual contract and the Department had no documentation to show how this
changed during contract negotiations.
·
For another procurement estimated at $1,370,000, some
elements from the scope of services section of the RFP were excluded from the
contract with the vendor and no documentation existed to show why.
We recommended the Department maintain adequate supporting
documentation in the procurement files.
The Department responded by agreeing, agreeing in part, and disagreeing
with various elements of the finding.
For instance, the Department maintains that individual scoresheets
were not required under the Department procedure applicable to procurements
and that use of a non-member facilitator in the selection committee process
was standard. For all elements, the
Department indicated corrective action that would be taken to address the
finding and recommendation. (Finding
05-01, pages 11 to 19)
CHANGES IN AWARD EVALUATION CRITERIA NOT
COMMUNICATED TO PROPOSERS
The Department used evaluation criteria to evaluate vendor
proposals that were not stated in the Request for Proposals (RFP).
·
In the Procurement Process Review procurement, the
Department changed the price evaluation from what was stated in the RFP. Price proposals from 3 of the 11 proposers
were opened. Price points were assigned based on the calculation in the RFP,
using total price. The Department
then requested Best and Final Offers from these 3 vendors. At this time, price points were calculated
by using both the total price and the hourly rate. When compared to the other vendor under
consideration, the winning vendor's hourly rate was $1.39 less but its
total price was $151,792 or 46% higher.
·
Additionally, in 1 of 10 procurements we reviewed,
the Department awarded a contract to a vendor that had not received the
highest scoring total based on evaluation criteria set out in the RFP. There was no documentation to show why the
vendor, which had the lowest ranked technical proposal and the third highest
price, was awarded the project.
(Finding 05-02, pages 20 to 22)
The Department agreed with our recommendation that it follow
evaluation criteria stated in RFPs and develop addendum to RFPs when it
determines there needs to be a change to the evaluation criteria.
EXTENSIVE VENDOR REVISIONS TO PROPOSAL DURING
CONTRACT NEGOTIATION PROCESS
The Department allowed the winning vendor for the EEO
Supportive Services Program procurement to extensively revise its proposal
during the contract negotiation process after initial scoring evaluations
were completed. For instance, between
scoring the original proposals in November 2004 and filing an executed
contract with the Comptroller in March 2005, the following changes occurred:
·
After scoring the vendor proposals, the Department
reduced the estimated total number of statewide hours for the project from
the 14,600 stated in the RFP to 6,397 in the negotiated contract. Of six vendor proposals evaluated, the
winning vendor had the highest overall proposed cost for the project.
·
The winning vendor was allowed to decrease its hours
from 10,343 in its proposal to 4,375 in the contract - a 58% decrease. The vendor's cost was reduced from $1.6
million in the proposal to $685,000 in the contract.
·
Some subcontractors identified in the winning
proposal were not actually used in the project.
Despite the significant changes made to the winning vendor's
proposal during the contract negotiation process, there was no documentation
in the procurement files to show that, after these changes, the winning
vendor's proposal remained superior to other proposers who were not afforded
the opportunity to make those revisions.
(Finding 05-03, pages 23 and 24)
The Department agreed with our recommendation to examine its
negotiation process to ensure fair and equitable treatment for all responsive
proposers.
FAILURE TO PUBLISH THAT CONTRACT WAS AWARDED TO
OTHER THAN THE LOWEST PRICED VENDOR
In 40
percent (4 of 10) of the procurements we reviewed, the Department awarded the
contract to a vendor that was not the lowest priced proposer and did not
publish this in the Procurement Bulletin as required by the Procurement Code
for professional and artistic contractors.
The contracts totaled a maximum contract amount of $11.8 million. (Finding 05-04, pages 25to 28)
The Department disagreed with the finding, stating that these
4 procurements were not professional and artistic services. In an auditors' comment we reiterated our
belief that these consultant contracts fall under the definition of
professional and artistic services.
We further noted that the Department had followed certain procedures
with regard to these procurements that are applicable only to professional
and artistic service contracts, such as using the Department's
"Professional And Artistic Services Administrative Review" form and
filing "Professional & Artistic" affidavits for three of the
four procurements.
FAILURE TO INCLUDE SUBCONTRACTOR INFORMATION IN
CONTRACTS
In 60 percent (6 of 10) of the procurements we reviewed, the
Department failed to have information on subcontractors included in the
contract. The estimated value of
these contracts is approximately $13 million. The Procurement Code requires all professional and artistic
contracts to include the names and addresses of all subcontractors and the
expected amount of money each will receive under the contract. We found:
·
For one of the vendors on the Dan Ryan/Kingery
Expressway Public Relations project, billings indicated the use of
subcontractors that were not detailed in the contract. Even though written notice for changing
subcontractors is part of the contract, Department staff reported this vendor
changes staff on the project without notifying the Department. For another vendor on this project, Department
staff reported that another Department official instructed the winning vendor
to put an individual on the payroll as a subcontractor. This individual was not listed in the
vendor's proposal but was named in the contract.
·
In another project (EEO Supportive Services), the
proposal from the winning vendor listed subcontractors to be utilized, but
the contract did not. Additionally,
the winning vendor made changes to the subcontractors it had proposed - including
using some of the losing vendors that bid on the procurement. We found no documentation in the files to
show any prior written consent from the Department for subcontractor changes
on this project. (Finding 05-05, pages 29 to 32)
The Department disagreed with the finding, stating that 5 of
the 6 procurements were not professional and artistic services. In an auditors' comment we reiterated our
belief that each of these contracts falls under the definition of
professional and artistic services.
We further noted that the Department had followed certain procedures
with regard to these procurements that are applicable only to professional
and artistic service contracts, such as using the Department's
"Professional And Artistic Services Administrative Review" form and
filing "Professional & Artistic" affidavits for 3 of the 6
procurements.
NOT TIMELY IN EXECUTING CONTRACTS
In 80 percent (8 of 10) of the procurements we reviewed, the
Department either was not timely in executing a written contract after the
announcement of the award or allowed vendors to initiate work on the project
without a formal written agreement in place.
On average, the length of time between the announcement of the award
and the filing of a contract with the Comptroller was 92 days (with a range
of 56 days to 161 days). The average
length of time between beginning work on the contract and the filing of the
contract with the Comptroller was 60 days (with a range of 20 days to 104
days). These contracts were estimated
to have a maximum contract value of $17 million. We also noted for one contract, the vendor was not only allowed
to start working without an executed contract, but documentation showed that
invoiced work was for dates prior to the announcement of the award. (Finding 05-06, pages 33 to 36)
We recommended that the Department take the necessary steps
to increase timeliness in reducing a contract to writing and the Department
agreed.
CONTRACT MONITORING DEFICIENCIES
We tested 10 FY05 procurements, of which 7 had payments
during FY05. Of these 7 projects for
which there were FY05 payments, our review determined there were questionable
expenditures in 86 percent (6 of 7) of those projects. A lack of supporting documentation
submitted by contractors and the Department's lack of adequate review led us
to question $699,597 or 15 percent of $4.5 million paid to these contractors
through the end of FY05.
Specifically, we found:
·
There are three vendors performing work for the Dan
Ryan/Kingery Expressway Public Relations project.
For the first vendor, the
contract was to run from November 2003 through December 2006; however, the
funding under the original contract was exhausted by December 2004. A $1.48 million amendment was effective
January 1, 2005, but not signed by the Department until April 2005. Of $1.2 million in billings, we found
numerous errors such as:
-- $320,070 in billings that lacked detailed
support, such as timesheets, and invoices or activities for subcontractors
that had no supporting documentation;
-- $18,688 in math errors or incorrect hourly
rates on billings that were approved by the Department;
-- $8,397 for other questioned expenses,
including $5,352 for invoiced services that included work dates prior to the
announcement of the award.
For a second
vendor, we questioned:
-- $19,286 in items billed (such as vehicle rentals and event
sponsorship fees) that were not listed in the "Pricing and
Compensation" section of the contract;
-- a $25,016 billing for Uniforms and Promotional Items
because there was no documentation to show that the items (sweat suits, polo
shirts, pens, etc.) were actually purchased;
-- $36,400 that was paid to a subcontractor by this
vendor. Timesheets submitted for this
individual were not signed by the subcontractor and Department staff
indicated there were questions surrounding this billed work. According to the Department officials,
another Department official instructed the vendor to put this subcontractor
on the payroll.
For the final vendor, because
of inadequate or missing documentation, we could not evaluate $1.3 million in
billings. We noted many invoices did
not contain any names, position titles, rates or number of hours worked. For invoices that did contain a name, title,
rate and hours worked, many were not for employees or rates that were listed
in the contract. Further, the
Department paid the vendor numerous times for media buys without any invoice
from the media outlet itself. Also,
over $318,000 was paid in FY06 for services performed in FY05.
·
For the EEO Supportive Service Program Contract, we:
-- Found while the State paid $348,000 for the last six
months of FY05, there were only 39 job referrals and only 38 placements of
individuals in jobs during that period.
Only 5 of the 38 placements were individuals identified as being
recruited by this vendor;
-- Questioned $129,755 in billings because many individuals
billed were not listed in the contract and so we could not verify the rate
billed for those individuals. There
were also instances that lacked documentation for activities billed at an
hourly rate;
-- Questioned $14,362 in billings for such items as overhead
and copying that were listed in the RFP as "non-billable items";
-- Questioned $5,200 in travel costs that were not
pre-approved by the Department as required by the RFP.
·
For the Procurement Process Review project, the
Department allowed vendor staff to work more hours than was proposed by the
vendor and the Department approved payment for travel in excess of the
contractual limit - all within the first 51 days of work even though the
contract was for 13 months. We also
questioned $19,180 because staff billed hours prior to the start date of the
contract and billed for individuals who were not listed in either the
proposal or the contract. (Finding 05-07, pages 37 to 44)
We questioned several other payments made for this and other
contracts we reviewed. The Department
agreed with the finding, noting that it already had protocols and processes
in place addressing the issues noted with these contracts.
OTHER FINDINGS
The remaining findings are reportedly being given attention
by the Department. We will review
progress toward implementing these recommendations in our next compliance
audit.
Responses to the recommendations were provided by Mr. Ron
McKechan, Chief of Audits.
AUDITORS’ OPINION
Our auditors state the basic financial statements of the
Department as of and for the year ended June 30, 2005 are fairly presented in
all material respects.
____________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:SES:pp
SPECIAL ASSISTANT AUDITORS
BKD,
LLP were our special assistant auditors for this audit.
|
