(Editor’s Note.  The following report is often the precursor of proposed rules to increase audit surveillance.)  A report by the General Accounting Office concluded that the General Services Administration could do a lot better job at negotiating multiple award schedules (MAS) and would save hundreds of millions by conducting pre and post-award audits of its contracts.  In spite of a ten fold increase over the last ten years of MAS sales – a major component of the government’s federal supply schedules program intended to use the government’s purchasing power to obtain “most favored customer” pricing - reviews of contract files indicate that contract negotiators are failing to obtain such favored pricing.  The GAO concludes efforts to obtain most favored customer pricing is caused by “the significant decline in the use of pre-award and postaward audits of pre-award pricing information.”  The report said earlier pre- and post-award audits had helped GSA negotiate and recover millions of dollars in excess pricing in the past but as the audits decreased, so did the cost savings.  The report stated that pre-award audits enable contract negotiators to verify that vendor pricing information is accurate, complete and current before a contract is awarded.  Post-award audits were discontinued in 1997 but the expected increase in pre-award audits did not offset the cessation as expected.  The report recommended there be assurance that pre-award audits be conducted when thresholds are met for new contracts and extensions and there be guidance helping contracting officers determine when post-award audits are needed.  A copy of the report is available at www.gao.gov/new.items/d05229.pdf.

In letters to the GSA, contractor and bar groups May 10 disagreed with the findings of the GAO Report and vehemently disagreed with the need to have post-award audits.  They stated that findings of inadequate price analysis and documentation did not amount to a finding that resulting prices were unreasonable.  Further, numerous recent improvements to the MAS program – e.g. increased competition at the order level and establishing subordinate blanket purchase agreements – were not taken into account and the GSA post-award audits under the Price Reductions clause of MAS contracts adequately protected the government’s interest by providing retroactive cost recovery if price reduction to other certain other customers is identified.  Instituting other post-award audit rights would be inconsistent with commercial practices and would violate the intent of Congress.

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