MEMORANDUM FOR:            CHARLES N. JEFFRESS
                                              Assistant Secretary for
                                                  Occupational Safety and Health
 

                                               PATRICIA W. LATTIMORE
                                               Assistant Secretary for
                                                   Administration and Management
 

                                                        / s /
FROM:                                     JOHN J. GETEK
                                                Assistant Inspector General
                                                    for Audit
 

SUBJECT:                                Audit of OSHA Procurement Activities
                                                Letter Report No. 17-98-005-10-001

This letter report is to provide you with the results of our audit of procurement activities by the Occupational Safety and Health Administration (OSHA) for the period FY 95 through FY 97. This audit was initiated by the Office of Audit (OA) for two primary reasons. The first reason was because the annual audit work associated with the Department of Labor (DOL) financial statements does not cover procurement in any significant depth. The second reason was that the OIG had received three anonymous complaints alleging fraud, waste, abuse and the illegal use of contractor funds at OSHA.

The audit sought to determine whether:

• OSHA procurement activities were conducted in accordance with Federal and DOL policies and procedures,

 
• procured products and services were worth the cost and were used by OSHA, and

 
• anonymous complaints to the OIG alleging improprieties in OSHA procurement activities have merit.

 

During the fieldwork, we did observe the following minor deficiencies in both OSHA and the Office of the Assistant Secretary for Administration and Management (OASAM):

• authorization to perform and bill for work was given to three vendors without the approval of the Contracting Officer;

 
• there were de minimis deficiencies in individual purchase orders;

 
• OSHA purchase order files did not contain all pertinent data;

 
• OSHA contracts were not being closed out in a timely manner by OASAM;

 
• there were differences between OASAM's Official DOL Contract File and the DOLAR$ regarding total Federal funds obligated in OSHA contracts;

 
• a task order modification contained a statement of work that was outside of the statement of work in the original task order; and

 
• two task orders contained statements of work which were outside of the statement of work in the master contract.

We appreciate the assistance and cooperation of your staff in the conduct of this audit. In particular, we want to thank Messrs. Robert Poogach, Gregory Sentkoski, and Dennis Sprouse in OSHA, and Messrs. Daniel Murphy and Lawrence Kuss in OASAM's Procurement Services Center.

For additional information, please contact Mr. Robert Curtis or Mr. John Dower of my staff at 219-6641.
 

Attachment
 

Our audit of OSHA's procurement activities during the period FY 1995 through FY 1997 found that, in general, OSHA and OASAM complied with applicable Federal and departmental requirements. However, we did observe and bring to management's attention several minor deficiencies in procurement activities, as summarized below.

The following observations are based on the review of the complete official (OASAM) file, as well as OSHA's files, for all 29 OSHA contracts active during the period FY 95 through FY 96, as well as a sample of FY 1997 task orders issued using those contracts. Observations are also based on a review of a statistical sample of OSHA and OASAM purchase order files for the same period. Based on these reviews, and on interviews with a variety of OSHA and OASAM staff involved with procurement actions, we brought the following observations to the attention of management officials in OSHA and OASAM.
 

From our review of purchase orders, we found that authorization to perform and bill for work (i.e., an obligation of Federal funds) in the amount of $19,100 was made to a vendor prior to the issuance of a purchase order and without the approval of the Contracting Officer.  (Vendor: Dun and Bradstreet, Purchase Order #: B9F46258) From our review of task orders, we found that work began on Task Order #: 3, Base Year, Contract # J-9-F-5-0079, and on Task Order # 2, Base Year, Contract # J-9-F-5-0091, before these task orders were signed by the Contracting Officer.
 

OSHA Response:

In the case of the purchase order, OSHA and its Division of Financial Control and Contract Coordination (DFCCC) concurred that the OSHA program office acted improperly and without legal authority by incurring an obligation of Federal funds prior to the issuance of a purchase order and without the approval of the Contracting Officer. According to DFCCC officials, this was not an isolated incident. DFCCC will emphasize to its program office managers that they are not authorized to obligate Federal funds without the approval of OSHA's DFCCC and of the DOL Contracting Officer.

OASAM Response:

OASAM also agreed with the observation.
 

Most deficiencies occurred in less than 1 percent of the sample and we considered them to be de minimus. The most common deficiency involved 64 purchase orders from the Chicago region that lacked a signature on the purchase order form maintained in the Chicago regional OASAM office. The purchase order form had no signature block for the purchasing order agent. We found that this deficiency had been addressed during FY 1996 through the issuance of a new DOL purchase order form with a designated signature block.
 

OSHA Response:

OSHA and its Division of Financial Control and Contract Coordination (DFCCC) have recognized the remaining de minimis deficiencies and have taken appropriate corrective action.
 

OASAM Response:

The Chicago OASAM office recognized the lack of a signature block on the purchase order form and took appropriate corrective action.
 

OIG raised the issue of weak internal controls within DFCCC because OSHA purchase order files did not contain copies of all procurement-related documents.

OASAM's purchase order files needed to be used in lieu of OSHA's in order to complete this review in a timely manner. OIG representatives brought the above observation to the attention of the DFCCC director and advised that a followup review of OSHA purchase order files would be made at a later date.
 

OSHA Response:

DFCCC did not initially see this observation as a weakness in internal controls. DFCCC explained that they had focused on the requirements for official payment files which did not require that requisitions be in the purchase order folder.

However, DFCCC acknowledged that maintaining requisitions and invoices in the purchase order file (rather than in separate locations) is a logical and useful recommendation. DFCCC believes that maintaining all purchase order-related documents in a single file will make it easier for anyone, including auditors, to review all information related to that purchase.
 

DFCCC supports OIG's position and has altered its policy. DFCCC has physically moved purchase order-related documents into a single file for each purchase order. A followup review of DFCCC purchase order files confirmed these corrective actions.
 

OASAM Response:

OASAM had no comment on this observation but concurred that logic would call for all related documents to be together in one place.
 

OSHA and DFCCC indicated and we confirmed that OSHA contract files are not being closed out in a timely manner by OASAM. This makes it extremely difficult for DFCCC since it has to keep accounts open for these contracts which have not had billings for long periods of time (years), but may eventually have closeout costs.
 

DFCCC believes that OASAM needs to reopen and fully staff its Contract Closeout Office in order to provide adequate service to the Department in closing out OSHA and other agency contracts in a timely manner.

The Director and Deputy Director of the Procurement Services Center (PSC) indicated that the responsibility for the close out of DOL and agency contracts was assigned to OASAM's Financial Management Services Center (FMSC). They indicated that efforts were being made by the FMSC to get on top of the closeout backlog but did not have any additional information. PSC officials suggested that this issue be brought to the attention of the Assistant Secretary for investigation and appropriate action.
 

This observation occurred with regard to the following contractors and contract numbers: Meridian/ERG (Contract No. J-9-F-3-0043), MIS (Contract No. J-9-F-2-0066), and Cedar Cliff (Contract No. J-9-F-1-0063). This observation resulted from Procurement Services Center (PSC) errors in totaling (in each official contract file) Federal funds obligated in those contracts. These errors created:

• a risk that overobligations of Federal funds may occur in a contract because all obligated funds are not included in the current total of obligated funds shown in the Official DOL Contract File, and

 
• unnecessary difficulties in the reconciliation of the total obligated Federal funds in DOL contracts between these two DOL systems.

 

OSHA believes that OASAM Office of Procurement Services (OPS) staff needs to be more careful when totaling obligated dollars in a contract, i.e., preparing the second page of a contract modification showing total dollars obligated. Improved care by OASAM's OPS staff will (1) avoid the risk of overobligations, and (2) reduce the difficulties in reconciling total obligations shown in the contract official file and total obligations shown in the DOLAR$.
 

The Director and Deputy Director of the Procurement Services Center were concerned with this observation, agreed that inaccurate totals of obligated Federal funds could cause problems, and indicated that they would call this to the attention of their staff and provide any technical assistance and training needed.
 

This observation occurred in reviewing modification number 2 to Task Order #2, Option Year #1, Contract No. J-9-F-5-0091, where the statement of work in the task order modification was not within the statement of work in the original task order. However, it was within the statement of work in the master contract. OIG determined that the appropriate practice in this situation would be to issue a new task order.
 

OSHA Response:

DFCCC agreed that OSHA should have issued a new task order. DFCCC officials are currently giving significantly greater scrutiny to statements of work in task order modifications to ensure that they do not exceed the statement of work in the original task order.
 

OASAM Response:

OASAM also agreed that issuing a new task order would have been the appropriate course of action.
 

This observation occurred in Task Order #6, Option Year 2, Contract No. J-9-F-4-0008, and Task Order #9, Option Year 2, for the same contract. Contract No. J-9-F-4-0008 is a labor hours contract with maximums and minimums, which the Department (OSHA) entered for 1 year with 4 option years. Section C.2 of the contract lists two items under the scope of work.

The statement of work identifies seven specific activities the contractor will perform. The contractor will:

• determine the technological and financial feasibility, compliance costs and economic impacts of a proposed regulation and its alternatives;

 
• estimate the benefits and relative cost effectiveness of a potential regulatory action;

 
• project the consequences to both large and small firms of compliance [with the regulation];

 
• assess the environmental impacts of a proposed regulatory action;

 
• identify and evaluate the degree of current risk as well as the potential for risk reduction by regulatory action;

 
• conduct methodological studies useful to OSHA in the development of health and safety regulations; and

 
• review/evaluate/update economic studies produced by other contractors or by OSHA.

By contrast neither Task Order #6 nor Task Order #9 has a direct relationship to regulations, any phase of the regulatory process or any assessment or evaluation concerning regulations.

Task Order #6 for Option Year 2 and Modifications 2 and 3 for Option Year 3 require the contractor to create an "Up-to-date and user friendly database of OSHA 170 Forms." OSHA 170 Forms are completed by OSHA compliance officers and inspectors to report on fatalities and catastrophic injuries.

The first task order dated September 1996 required: the design of a database; review of the 170 form for each accident; entry of keywords; entry of date, time and SIC code; edit and entry of accident summary; and entry of occupational code. A backlog of 18,000 forms was identified. The task order stated that the database would be useful to facilitate use of the information in the development of construction safety and health standards, but did not describe how. (Task Order - Introduction) An initial $99,990 was authorized and no time frame was assigned.

The second modification, dated February 1997, noted a backlog of 16,000 forms and stated the purpose of the modification was to increase the funding by $200,000 and to adjust hourly billing. The scope of work was revised somewhat -- review and revise 15-16,000 forms, entry of keywords, and devise methods to improve the way compliance officers record the information. No time frame was established.

The third modification, dated July 1997, contained an expanded introduction and reported that under the first two instruments, the contractor reviewed and revised all records for which OSHA had an original hard copy, about 15-16,000 records. The modification reported that approximately 30,000 records remained and added $100,000 to review and revise these records, enter keywords, and devise methods to improve initial reporting on these forms. No work could be performed after December 31, 1997. In total, $399,990 was authorized for expenditure and $360,213.43 was invoiced.

These three task orders/modifications created an updated information system containing information from accidents involving fatalities and catastrophic injuries. While it appears that this information will be useful to OSHA and to the public (the task orders indicate it will be on the Internet), the master contract does not include development of a modern database as part of the statement of work. Therefore, we determined that this task order with modifications does not fall within the scope/statement of work described by the master contract.

Task Order #9 for Option Year 2 calls for the contractor to collect data and prepare a report to Congress concerning OSHA's "standard setting, enforcement activities, and on the present state of workplace safety and health." (Introduction)

The report is to include information for four fiscal years and to describe and characterize: injuries and illnesses, standard setting activities, enforcement (including inspections), OSHA cooperation with other agencies, issues of manpower requirements in the field of safety and health, toxic substances under consideration for regulation, and recommendations for legislation. Of the $31,578.00 budgeted for use under this task order, the contractor submitted invoices for only $17,1765 within the requisite time.

Two items for the report -- OSHA's activities with standard setting activities and toxic substances being considered for regulation -- relate peripherally to the regulatory process as covered by the master contract. However, the deliverable, a report to Congress, will only describe OSHA's activities. The product is not any type of evaluation or assessment for the creation of regulations, as called for in the master contract. The master contract does not include reports to Congress as part of its statement of work and we determined that Task Order #9 is outside of the scope/statement of work of the master contract.
 

OSHA Response:

DFCCC expressed the view that determinations regarding scopes/statements of work involve some judgment. DFCCC also stated that in the past, they had relied on OASAM to monitor task order scopes/statements of work to ensure that they fell within the scope/statement of work in the contract.

However, DFCCC stated that they now realize that this may have been an unrealistic and impractical policy because OASAM often receives high volumes of task orders that need to be processed quickly and may not have the time or staff to monitor scopes/statements of work in task orders. DFCCC concluded that it will need to take a closer look at task order statements of work to ensure that they fall within the scope/statement of work in the contract and may need to provide technical assistance/training to OSHA COTRs on this subject. DFCCC has begun to return task orders with work outside of the scope/statement of work in the contract to the program offices/COTRs responsible for their development citing the scope problems.

OASAM Response:

OASAM's initial response considered only the terms of the contract under Section C.2 which is a general statement of the scope of work. In discussions with OASAM representatives, we indicated the specific problems related to the statement of work requirements of the contract included in Section C.3. OASAM's subsequent response was that OSHA might want to consider using a broader RFP with a broader statement of work to cover a wider variety of consulting services.

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