Sato & Associates Contract

Based on our investigation, we believe there was insufficient urgency to limit competition and that the sole-source contract to Sato & Associates was not proper. Further, the cost of that review, over $90,700, appears artificially high. When we asked the contracting officer why she did not attempt to identify other individuals or companies that could perform the contract, she stated that Ms. Lau had told her that Mr. Sato “had unique capabilities which would preclude the award of a management studies contract to anyone else.”

		Contract Award

On January 9, 1995, Treasury’s PSD awarded a contract at the request of the Treasury OIG to Sato & Associates to perform a management study of the Treasury OIG. The contract was awarded without full and open competition on the basis of unusual and compelling urgency. The J&A for the Sato contract provided that “he Government would be injured if the Inspector General is unable to quickly assess any needs for management reform and make any required changes that would ensure that she receives the appropriate staff support for the implementation of her policies.” According to the contracting officer, when she questioned Ms. Lau about the justification for the Sato contract and whether an urgent need existed, Ms. Lau stated that she did not want to divulge too much of “the internal goings-on” in the Inspector General’s Office to the contracting officer. In June 1995, Interior awarded a management study contract to Sato & Associates for approximately $62,000 less than the offer in Mr. Sato’s unsolicited proposal. They were to “a. On August 17, 1995, OPM conducted a preliminary briefing with senior OIG staff concerning the nature of the OIG problems. She wanted the contract awarded before the annual OIG managers’ meeting scheduled for September 14, 1995, to prove to her managers that she intended to fix the problems identified in the OPM study. Following receipt of the proposals and oral presentations by the offerors, two OIG officials selected Kathie M. Libby, doing business as KLS, a consultant from OPM’s list, as the successful contractor. Contract Award

On September 12, 1995, a time-and-materials contract was awarded to KLS. The agency justified limiting the competition on the basis of unusual and compelling urgency. However, we do not believe Ms. Lau’s ability to convey that message at the management conference and to correct the problems identified in the OPM study would have been seriously impaired had the announcement of the actual consultant been delayed by a few months in order to conduct a full and open competition. The original term of the contract was 1 year. In our view, the largest modification (Modification 4) materially deviated from the original contract’s scope of work and should have been the subject of a separate procurement action. Poor Management Practices

In addition to legal improprieties in the manner in which the agency awarded and assigned tasks under the contract, we found a pattern of careless management in the procurement process and in oversight of performance under the contract. In several instances, KLS performed and billed for work that was not included in the contract statement of work. A review of Ms. Lau’s travel vouchers revealed that she had made 22 trips between September 1994 and February 1997 (30 months)—5 to California of which 3 included stops in San Francisco.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the award of a sole-source contract to Sato & Associates for a management study of the Department of the Treasury's Office of Inspector General (OIG) and of a consulting services contract to Kathie M. Libby, doing business as KLS, using other than full and open competition. GAO also reviewed the nature and purpose of trips to California made by Treasury Inspector General (IG) Valerie Lau since her appointment.

What GAO Found

GAO noted that: (1) shortly after her confirmation as Inspector General, Ms. Lau notified the Treasury Procurement Services Division (PSD) that she wanted Sato to perform a management review; (2) PSD awarded a sole-source management study contract to Sato on the basis of unusual and compelling urgency; (3) although Ms. Lau stated that the need to limit competition was urgent because of the need to make reassignments in the senior executive ranks and to marshal the resources needed to conduct audits, there was insufficient urgency to limit competition; (4) the price of Sato's contract for the Treasury OIG effort appears to be artificially high, in light of the fact that the firm performed a similar review of the Department of the Interior OIG for approximately $62,000 less; (5) in September 1995 PSD awarded a time-and-materials, consulting services contract to Libby to review and analyze an Office of Personnel Management (OPM) report on morale and diversity problems in the OIG office and assist OIG managers and staff concerning goals identified in the OPM study; (6) the contract was awarded on the basis of unusual and compelling urgency following limited competition; (7) the justification for limiting competition was not reasonable, since Ms. Lau could still have conveyed to her managers that the problems identified in the OPM study would be addressed and corrected those problems, had the consultant selection been delayed a few months to obtain full and open competition; (8) the largest modification made to the KLS contract was outside the scope of the contract and should have been obtained through a separate, competitive procurement; (9) GAO identified a pattern of careless management in the procurement process and in oversight of performance under the KLS contract; (10) OIG failed to fully understand and articulate its needs, resulting in a fourfold increase in the contract's total price and a 1-year extension to the period of performance; (11) OIG paid for work that was not authorized, and payments were made without verification that work had been done and without determining that travel and transportation costs documents had been received; and (12) all five of Ms. Lau's trips to California made between September 1994 and February 1997 were scheduled for work-related reasons.