By NEIL GORDON
The Internal Revenue Service (IRS) is not doing a sufficient job of vetting its contractors according to a new audit report by the Treasury Inspector General for Tax Administration (TIGTA). TIGTA's findings indicate that billions of taxpayer dollars may be at increased risk of contractor fraud, waste, or abuse.
The Federal Acquisition Regulation (FAR) requires that federal agencies award contracts only to contractors that are responsible (i.e. honest, ethical, and capable of performing the contract on time and in a satisfactory manner). However, TIGTA found that 60 of the 88 contract files it reviewed (68 percent) did not contain sufficient documentation to support IRS contracting officers’ determinations of responsibility.
“The IRS does not have an effective process to ensure that contracting officers’ determinations of present responsibility are adequately conducted and documented in compliance with Federal Acquisition Regulation requirements,” the report concludes. “As a result, the IRS has an increased risk that procurements may be awarded to nonresponsible contractors…potentially leading to additional costs to the federal government due to subsequent default, late deliveries, or other unsatisfactory contractual performance.”
A substantial amount of taxpayer money is at risk. According to the report, the IRS currently administers about 1,000 contracts and task and delivery orders worth more than $39 billion. Poorly documented responsibility determinations also increase the likelihood of costly and time-consuming legal actions by unsuccessful bidders or contractors whose integrity is called into question by a nonresponsibility determination.
More than half of the files TIGTA reviewed lacked confirmation that contracting officers had checked the Excluded Parties List System (EPLS) immediately prior to awarding the contract. Agencies are required to check EPLS after the opening of bids and again immediately before contract award in order to prevent money from going to excluded contractors (i.e. those suspended, debarred, or proposed for debarment). The IRS admitted to TIGTA that checking EPLS immediately before contract award “was often overlooked.” Good news: TIGTA determined that none of the contractors in question were excluded at the time they won their contracts.
Nearly one-fifth of the files lacked documentation supporting that the contracting officer had checked the Central Contractor Registration (CCR) database, in which contractors report contract-related civil, criminal, and administrative proceedings and information about their corporate and financial structure. Nearly one-third of the files contained no indication that the contracting officer had evaluated contractors’ past performance history via the Past Performance Information Retrieval System (PPIRS). A majority of the contracting officers TIGTA interviewed admitted they do not regularly use PPIRS.
Except for a brief mention at the end of the report, TIGTA had nothing to say about the Federal Awardee Performance and Integrity Information System (FAPIIS), a responsibility database contracting officers have been required to check since it became operational in April 2010. FAPIIS, which incorporates data from EPLS, CCR, and PPIRS, was made available to the public in April of this year. (Read POGO’s reviews of FAPIIS here, here, and here.)
This is at least the third time in the last year an audit has uncovered problems in the IRS’s contracting system. In January, POGO blogged about a TIGTA report that found the IRS had awarded contracts to at least 20 companies with more than $5 million in delinquent corporate and payroll taxes. A few months later, we blogged about TIGTA finding that 11 IRS contractors owing $4.3 million in taxes had received more than $356 million in payments from the IRS and an additional $3.7 billion from other federal agencies.
These reports should serve as a wake-up call to the IRS that it needs to strengthen its contracting practices in order to better protect our money, every penny of which it extracts from taxpayers under a fairly rigorous fiscal oversight system. The IRS should be held to equally rigorous standards.
Neil Gordon is a POGO Investigator.
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