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FAA’s Competitive Award Practices Expose Its Major Program Contracts to Cost and Performance Risks

Requested by Chairman Bill Shuster of the House Committee on Transportation and Infrastructure
Project ID: 
ZA2020020
What We Looked At
In support of its mission to operate the National Airspace System, the Federal Aviation Administration (FAA) relies on an expansive portfolio of capital assets—including infrastructure, technology, and systems. These capital investments contribute to the multibillion-dollar acquisition portfolio that FAA manages each fiscal year. Over the years, various stakeholders have identified significant issues with the Agency’s acquisition processes and practices. Citing those concerns, Representative Bill Shuster, then Chairman of the House Committee on Transportation and Infrastructure, asked us to conduct a review. Accordingly, our audit objective was to assess FAA’s competitive award practices for its major acquisition program contracts, including safeguards against conflicts of interest (COI) on the part of FAA officials involved in the award process.
 
What We Found
FAA’s competitive award practices for its major program contracts expose the Agency to cost and performance risks. First, FAA’s actions to establish fair, reasonable, and realistic contract pricing lack sufficient support—specifically, independent Government cost estimates (IGCE) and price analyses, both of which are key to efficient pricing. Second, FAA’s award practices for its major program contracts do not always promote competition, which could contribute to the Agency’s continued reliance on the same small pool of contractors. Third, FAA is putting the integrity of its procurement process at risk because it does not consistently take required actions to prevent COI. For example, FAA could not provide complete COI agreements for all the officials involved in the selection process for five contracts with a total value of over $1 billion. Finally, FAA lacks complete award documentation and a tracking process for its major program contracts, which impacts its ability to manage potential cost and schedule risks. We determined that FAA put up to $4.9 billion in Federal funds at risk because it did not have required IGCEs before it awarded three competitive contracts and did not provide a sound rational basis for awarding another three contracts noncompetitively.
 
Our Recommendations
FAA concurred with all 10 of our recommendations to improve its major program contract award practices and provided appropriate completion dates.

Recommendations

Open

Closed

No. 1 to FAA

Revise the Acquisition Management System (AMS) and/or FAA's Contract Pricing Handbook to address challenges around conducting appropriate price and cost analyses in order to reliably assert and support a fair and reasonable price determination for a major program contract award. This should include techniques and scenarios to address specific issues that could arise during the award process, such as establishment of a contract ceiling amount at award that includes pricing for all contract work (including option years) using a sound source or basis

No. 2 to FAA

Revise AMS to require acquisition planning for both competitive and noncompetitive major program contracts to allow adequate time and the possibility for achieving competition of option years and follow-on contracts.

$4,900,000,000
No. 3 to FAA

Strengthen internal controls to verify that all independent government cost estimates (IGCE) are completed in compliance with Agency requirements prior to the award of a major program contract. Implementing this recommendation could put up to $4.9 billion in Federal funds to better use by improving FAA's ability to establish contract pricing that is fair, reasonable, and realistic.

No. 4 to FAA

Revise AMS to clarify requirements around what actions the Program Office must take prior to the award of a major program contract when an IGCE varies by more than 15 percent from the proposed offer, and strengthen internal controls to verify these requirements are followed.

No. 5 to FAA

Strengthen internal controls to hold acquisition and program officials accountable for providing timely signatures on packages for any major program contract procurement action—such as increasing the ceiling or definitizing a contract line item number—to be submitted for Chief Financial Officer approval, per Agency requirements.

$17,300,000
No. 6 to FAA

Strengthen internal controls to ensure a sound rationale is documented to support each noncompetitive major program contract, per Agency requirements, before the award is made. Implementing this recommendation could put up to $17.3 million to better use by allowing FAA to realize the benefits of competition and make more efficient use of these Federal funds.

No. 7 to FAA

Strengthen internal controls to verify compliance with Agency requirements for conflict of interest agreements to be completed by all officials involved in a major program contract source selection process before they perform any of their responsibilities.

No. 8 to FAA

Strengthen internal controls to verify compliance with Agency requirements regarding completion and approval of source selection evaluation plans for major program contracts.

No. 9 to FAA

Strengthen internal controls to verify compliance with Agency requirements to use code names in lieu of contractor names in all source selection and evaluation communication and documentation for major program contracts.

No. 10 to FAA

Strengthen internal controls to verify compliance with Agency requirements for maintaining centralized files for major program contracts—including a complete record of the acquisition history and decisions—and for archiving and destroying documentation.