1). FEMA Has Made Improvements in Its Process for Monitoring NFIP Contracts That Incorporate Best Practices

FEMA has improved its contract management process since our prior  reports. FEMA Updated Policies and Procedures for Contract Management

FEMA has made progress in establishing or revising its guidance on  contract management and oversight since we reported on these issues in  2008 and 2011. To address weaknesses in its oversight and  management of acquisitions, we recommended in 2011 that FEMA  complete the development and implementation of its revised acquisition  process to be consistent with a DHS directive that sets overall policy and  structure for acquisition management for DHS agencies. DHS and FEMA Developed Guidance for CORs for Performance Reporting

DHS and FEMA have developed guidance to implement federal  requirements to report their assessment of contractor performance in a  government-wide database—the Contractor Performance Assessment  Reporting System (CPARS). FEMA periodically compared and analyzed actual performance data  against goals for each of the three contracts through operating reports,  which would allow management to review the status of deliverables and  milestones and be aware of inaccuracies or exceptions that could indicate  internal control problems. 3). For  example, in 2010 and 2011, FEMA identified persistent issues with the  BSA contractor’s deliverables, including quality and timeliness, and faced  challenges in resolving those issues, which may have been avoidable if a  quality assurance surveillance plan had been developed and used. Performance Assessments Not Reported for Two of the Contracts Reviewed

FEMA did not report performance assessments in CPARS for two of the  three contracts we reviewed. Receiving a  positive CPARS assessment can enhance a contractor’s reputation when  bidding on future contracts, and as such, the assessments provide an  incentive for the contractor to perform as expected. Regulations and agency guidance direct that  such plans be used. FEMA officials stated that they are considering  various options to ensure that the plans are in place for future contracts. However, without detailed surveillance plans, the expectations of the  COR and contractor can be misaligned during performance evaluations  and may not focus on the quality, quantity, and timeliness of performance  outputs. As with the surveillance plan, by  determining the extent to which this situation exists, identifying the root  cause, and implementing steps to address the root cause, as appropriate,  FEMA can help ensure that its—and other agencies’—contracting  decisions and management draw on complete, relevant, and timely  performance information. To help ensure FEMA’s contract monitoring provides a consistent,  structured, and transparent method to assess contractor services, the  FEMA Administrator should determine the extent to which quality assurance surveillance plans  have not been developed for FEMA contracts;  identify the reasons why quality assurance surveillance plans  were not developed; and develop additional actions as needed to address the reasons to  help ensure that quality assurance surveillance plans are  developed for its future awards. To help ensure that federal contracting officials have complete and  timely information about the performance of contractors, the FEMA  Administrator should determine the extent to which CPARS assessments have not  been completed for FEMA contracts;  identify the reasons why CPARS assessments were not  completed; and develop additional actions as needed to address the reasons to  help ensure that assessments (ratings) for FEMA contractors are  reported in CPARS on a timely and consistent basis. We are sending copies of this report to the Secretary of Homeland  Security. Appendix I: Objectives, Scope, and Methodology

Section 100231 of the Biggert-Waters Flood Insurance Reform Act of  2012 mandates GAO to review the three largest contractors used in  administering the National Flood Insurance Program (NFIP) of the  Federal Emergency Management Agency (FEMA). We examined (1)  FEMA’s progress in updating its process for monitoring NFIP contractors  since our prior reports, and (2) the extent to which FEMA followed its  monitoring process for the largest NFIP contractors. Using data  provided by the FEMA Office of the Chief Procurement Officer, we  identified the 10 largest contractors for NFIP based on the amount of  funds obligated to NFIP contractors over the previous 5 fiscal years (from  2008 through 2012). To assess the extent to which FEMA followed best practices and  procedures for contract management, we compared FEMA’s contract  management practices to criteria outlined in the following sources:
Standards for Internal Control in the Federal Government;
A Guide to Best Practices for Contract Administration;
FEMA, Contracting Officer’s Representative Handbook;
FEMA Risk Insurance Division, Contracts Management Reference
FEMA Risk Insurance Division, Discrepancy Report Procedures; and
FEMA Risk Analysis Division, Risk MAP Award Fee Plan.
Why GAO Did This Study

In operating NFIP, FEMA spends hundreds of millions of dollars annually on contractors that perform critical functions. The Biggert-Waters Flood Insurance Reform Act of 2012 mandates GAO to review the three largest contractors used in administering NFIP. In prior reports, GAO found problems with FEMA's oversight of contractors responsible for performing key NFIP functions. This report examines (1) FEMA's progress in updating its process for monitoring NFIP contractors since GAO's prior reports, and (2) the extent to which FEMA followed its monitoring process for the largest NFIP contractors. To address these objectives, GAO analyzed FEMA data on funds obligated to contractors from fiscal years 2008 through to 2012, reviewed information from FEMA on contract management policies and procedures, and assessed data covering fiscal years 2011 to 2013 on the implementation of these policies and procedures as they pertained to the three largest contractors. GAO also interviewed FEMA contracting staff and contractors.

What GAO Found

The Federal Emergency Management Agency (FEMA) has made progress in improving its processes for monitoring NFIP contracts since GAO last reported on these issues in 2008 and 2011. For example, GAO recommended in 2011 that FEMA complete the development and implementation of its revised acquisition process to be consistent with a Department of Homeland Security (DHS) directive. FEMA updated its contract management guidance and revised its handbook for contracting officer's representatives to be consistent with DHS directives. The updated handbook also contained many of the elements identified in a federal guide to best practices for contract administration. Furthermore, the FEMA division that manages the National Flood Insurance Program (NFIP) developed a contract management reference guide that followed FEMA's handbook and federal best practices guidance.
With some exceptions, FEMA largely followed its contract monitoring procedures for the three largest NFIP contractors GAO reviewed. For example, FEMA ensured that relevant staff overseeing selected contracts received appropriate training. Also, FEMA periodically compared and analyzed actual performance data against goals for each of the three contracts through operating reports, which would allow management to review the status of deliverables and milestones and be aware of inaccuracies or exceptions that could indicate internal control problems. However, FEMA did not develop a quality assurance surveillance plan for one of the contractors--a best practice and a key requirement identified in regulations and guidance. In 2010 and 2011, FEMA identified persistent issues with the contractor's deliverables, including quality and timeliness, and faced challenges in resolving those issues, which might have been avoidable if a quality assurance surveillance plan had been developed and used. FEMA officials stated that they are considering options to ensure that the plans are in place for future contracts, but did not provide specifics on those options or when they plan to implement them. Without detailed quality assurance surveillance plans, the expectations of the agency and the contractor can be misaligned during performance evaluations. Separately, for two of the contracts FEMA staff did not enter performance evaluations in the Contractor Performance Assessment Reporting System (CPARS), a database DHS uses to record assessments of performance of government contractors. Federal and DHS regulations and FEMA contract management guidance require entry of contract performance information in CPARS within certain time frames. By not reporting such information, FEMA disadvantaged the contractors and the government by not providing data that could be used in evaluating the contractors for future contract awards. For instance, receiving a positive CPARS assessment can enhance a contractor's reputation when bidding on future contracts, and as such, the assessments provide an incentive for the contractor to perform as expected. FEMA officials have acknowledged the issue. By determining the extent to which performance evaluations have not been entered into CPARS for its contracts, identifying the reasons why, and addressing those reasons, as needed, FEMA can help ensure that its--and other agencies'--contracting decisions and management draw on complete, relevant, and timely performance information.

What GAO Recommends

To improve monitoring and reporting of contractor performance, we are recommending that FEMA (1) determine the extent to which quality assurance surveillance plans and CPARS assessments have not been prepared, (2) identify the reasons why, and (3) take steps, as needed, to address those reasons. FEMA concurred with GAO's recommendations.