The EPA Inspector General conducted an audit of the EPA’s use of contracts – specifically examining their use of high-risk, sole source and bridge contracts. Sole-source means that the contract was awarded to an entity without competition. A bridge contract means the contract was an extension of an existing contract or a short-term contract to an incumbent contractor. These are typically justified as necessary to avoid a lapse or delay in services. The IG found that the EPA frequently used these contracts due to poor planning, placing hundreds of millions of taxpayer dollars at risk.
In 2009, President Obama issued a memorandum stating that agencies should rely on lower-risk, firm-fixed contracts. Yet, the EPA IG found that in the second quarter of Fiscal Year 2017, only 9 percent of the EPA’s contract obligations were using low-risk contracts. The EPA points out that the cost savings from relying more on low-risk contracts could have been used for mission-critical activities.
One particularly egregious exampled cited in the report found that the EPA justified the use of a high-risk contract because they could not determine a reasonable cost certainty for the program. But the same requirements have been in place for 25 years, meaning that there should be enough financial history to contract on a fixed price rather than a cost-reimbursable basis.
The EPA OIG clearly stated that “the high-risk contract decisions that we sampled—with a combined value of millions of dollars—did not support that higher risk contract vehicles were necessary.”
The OIG report recommends that the EPA update its acquisition policies to require the use of low-risk contracts and to permit the use of high-risk contracts only when the low-risk variety is not possible. They also recommended tightened requirements and sign-off from a higher-level official on the contract approvals.
“Without improving its acquisition planning process, the EPA may continue to spend hundreds of millions of dollars on high-risk contracts that waste taxpayer resources.”