IG raps Air Force for contracting lapses

Air Force contracting officers have not consistently followed the rules before issuing solicitations for risky cost-reimbursement contracts, a type of contract that lawmakers and the Obama administration want the government to shy away from, according to an inspector general's audit.

The IG report shows that 48 percent of the cost-reimbursement contracts auditors reviewed did not comply with the interim Federal Acquisition Regulation rule for that type of contract. Those contracts -- 75 out of the 156 the IG reviewed -- were worth $8.8 billion.

The IG attributed the lapses largely to contracting officers’ failure to understand the entire rule. “They were unaware of the rule, assumed it did not apply to task or delivery orders when the basic contract was issued before the rule, or did not document actions taken to conform to the rule,” the IG wrote in the report, which was released March 21.

Contracting personnel might have increased the Air Force’s risk because cost-reimbursement contracts offer fewer incentives for companies to control their costs. They are reimbursed based on allowable costs instead of the delivery of a product or service.

In response, Maj. Gen. Wendy Masiello, the Air Force’s deputy assistant secretary for contracting, assured auditors she would issue a memo in May that emphasizes the importance of the interim FAR rule while encouraging contracting personnel to transition current contracts away from the cost-reimbursement arrangement.

“Effective communication between team members is crucial for sound acquisition planning and throughout the acquisition life cycle,” she wrote.

Furthermore, she intends to recommend that the Air Force opt for awarding hybrid multiple-award contracts to allow for more flexibility when soliciting agreements at the task- and delivery-order level.

Acquisition regulators released a governmentwide interim rule to the Federal Acquisition Regulation in 2011. It provides guidance on the handling of all contract types other than firm fixed price. It also highlights the circumstances in which cost-reimbursement contracts are appropriate, the need for planning documents to support the selection and the resources necessary to manage the high-risk contracts.

The interim rule was issued in response to the fiscal 2009 National Defense Authorization Act and was based on a memo sent by President Barack Obama in 2009 to minimize agencies’ use of high-risk contracts. They include cost-reimbursement and time-and-materials contracts. Lawmakers and administration officials have pushed for contract types that have a set fee, such as fixed-price contracts.