Tobacco Documents Online

~ i~jl ~ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY ~ ,r+1r1W! WASMINGTON. D.C. 20460 ., . ~1 tiC~. y MAR 3 1993 TMEiHSFECTO/10EMERAL Honorable 2'homas ,T. B1 iley, Jr. Ranking Republican Menber 3ubcommittea on OversiQht and Investiqations Cornittes on Enarqy And ConoQerce House of Representativer WasRincjton, DC 20515 Dear Mr. elileyi In response to your request of Septambor 8, 1992, the Office of Inspector vensra~l has reviewed the award of a subcontract by ICF, Inc., to the Smokinq Policy Institute (SPI). The records we oxamined included both the prine contract and subcontract docunents, along with their related modifications, work aesignm.nt rscords, award fee perforaance ratinqu, and monthly ztatua re?orts. The criteria used for conpliance purposes were the Federal Acquisition Regulations (TAR) and the EPA Acqu3sitior. Regulations (EpMR). Specifically, you requested that we answer the following questions: (1) Did the PPA comply with applicable procurement laws and regulations in the award of the subcontract to SP: to prepare the Smoking Policy Guide? rhs TAR requires contractors to seleet subcontractora on a competitive basis to the maximum practical extent consistent vith the ebjeetiv.s and requireaents of the contract. At the time of your request, we were in the process of reviewing ICr subcontraots. Our preliminary work indicates in numerous instances, ICFts standard procedure is to award subcontracta on a aolc source or non-eompetitive basis to members of a subcontractor "team" based on unsubstantiated assurances that this is in the best interest of the Governtaent. This issua is discussed further in our response to question 6. The award to SPI was different because the firm was not a member of the subcontractor team. Although the award complied with the FAR becauss the contractor received the Aqeneyos approval to place the subcontract on a non-competitive basis, we believe the award was taintsa in how it was processed. First, there was no attempt by ICr to seek competition. Second, the actions by an EPA program officiai qave the appearaZee that he, rather than ICl, seleetsd the subcontractor. ISSUE 43 APPEhTDI!X' B

2 Acoordinq to the FAR. only a contracting officer may enter into contracts on behalf of-the Government. However, in regard to the SPZ award, the EPA program official: o Discusued the task with SPI on luly 11, 1988, in a phone conversation during which he mentioned the availability of $30,000. o Approved the assignment of the task to ICr on July 18, 2982. o Sent a letter to 5PZ on July 23, 1988, solicitinq its interest in initiatinq the taak, aqain mentioninq the availability of $30,000. SPI sent a proposal (dated Auqust 1) to the EPA program of:icial offerinq to use the manuscripts he had provided to produce an edited aanual for 930,000. On August 10, 1988, t:%e contracting officer formally assigned the task to ICl, but on Sept6cber 19, 1988, IICY subcontracted it out to SPI. according to ICF records, t::e budget :or tne assignment was $30,000. The EPA program official admitted in a May 8, 1992, mencrandum that his contacts vith SPi vere inappropriate. ZCF andoubtedly learned of the suflcontraetor's existence from discusaions witTh the EPA program of=ic:al, and in retrospect, it probably appeared that he had selected 5pi. Nonetheless, he also maintained that. he did not share any SPI corrospondence (includinq the proposal) with ICF, and did not direct or pressure TCt to hire the vubcontraetor. Unfortunately, neither he nor ICF can prov:de any specific records relating to these discussions, ana the lact remains that he contacted SPI before An¢ after approving the assigr,aant to ZCF. We agree that the EPA proqram official's conduct was insopropriate, and believe that it may have been an "unauthorized action,• cnder the EPAAR, that is a contract action taken by an individual without authority. Such an action does not legally Qbliqate the Government, although the contracting officer may later ratify the ac:tion. However, if the unauthorized action could not be rata ied, the person committing the action say be hsld personally liable. (2) What were the circumstances surrounding the undated mole source justification? oid the reasons stated in the justification Aest the eriteria for a sole source procurement? In t2te undated sole source document, ICY asserted that: (1) SPI was the most qualified source; (2) that no other firm could do the work without both increasing costs and creating uaacceptable delays; and (3) it would not be feasible for another contractor to devolop the necessary qualifications without

3 expending most, and perhaps all, of the resources available under this work assiqnmont. Aa already discussed, the selection of SPI hinqed, at least partially,.on the actions taken by the EPA program official rather than on any attempt by ICY to obtain competition. Moreover, the EPA official contacted not only SPI, but also a second potential source. Under these circumstances we believe that the procurement should have not proceeded on a non- competitive basis. (3) were there any personal or arganizatior.al conflicts of interest present :n the award of the contract? Part 3 of the FAA addresses personal conflicts of interest. In general, it addresses the avoidance of any conflict or appearance of conflict of intorest in government-contractor relationships. Subpart 9.5 of the tAR addresses orqanizational conflicts of :ntereet, which exist when the nature of the work to be performed under a proposed contract :aay, vithout some restriction on future activities, result in an unfair --oatp.titive advantage to tte contractor, or iapair the contrac;tor's objsctivity in p.rfcrminq the work. Each contracting situation must be examined on the basis of its particv:ar facts and the nature of the proposed contract. The exercise of common sense, good judgment, and sound discretion ia required in both the decision on whether a signif_cant potential conflict exists, and if Lt does, the development of an appropriate means for resolving it. The FAR prcvijes several illustrative examples to help contractinq officers decide vnether organizational conflicts of interest exist. We believe the following example at FAR 9.509 (q) pertains to SFI: Company A recwives a contraat to prepare 4 detailed plan for scientific and techn:cal traininq,of an aqency's personnel. It suggests a curriculum that the aqency endorses and incorporates in its request for proposals to institutions to establish and conduct the training. Company A may not be awarded a contract to conduct the training. SPI haii exiRted for over five years at the time it received the assiqnment to develop ttue Guide. As a nonprofit orqanization. SPI presented itself as a technical export on the issue of environz+ental tobacco smoke in the workplace, and as such, was hired by various orqanizations as a consultant in the field. SPI was taslcad by EPA to develop a quide vhich would provide government and private sector decision-sakers with information on the technical basis for controlling involuntary exposure to envirormental tobacco smoke and to desozibo a variety

4 of technical and policy options for instituting effective smoking restrictions. In our opinion, there was no actual personal or orqunisational conflict of interest. Of course, if 5PI were awarded a contract to implement the Guide, that would constitute an actual organizational conflict of interest. (4) Did the EPA iuproperly contract for preparation oi the Policy Guide before it tiad completed its risk assess3nent on the health effects ot passive smokinq? The Agency took the position that because the indoor air program was largely -on-rsgulatory, a formal risk assessment was not reqiiit'ed. EPA aiso stated that it believed it was appropriate to develcp a policy to reduce exposure to environmental tobacco sn+oke based on conclusions made by the Surgeon General, the National Research Council, and the rntsznational Agency for Research on Cancer. During our review, we searched for specific criteria upon which to evaluate the timinq of the Policy Guide vcrous the risk assessment, but found nonn. Hence, we cannot conclude that the Agency improperly ccntracted for the Guida solelv because :t had not :lrst completed a risk asasaasent. (5) was it necessary fur the Guide to be prepared by private contractors? We reviewed the draft Guide submitted by SPI, the comments made by ICY, at'd the coIIcisnts received from the public. We concluded •:3at it was not necessary for the Culde to have been prepared by a contractor because it was basically compiled from docuser.ta already in exsstence. (6) Is this case unique, or is it merely one of a nuAber of exaaples oi the EPAts use of broad scope prime cor.tract3 as a aeans Qt circumventing the coapetitiva procurement process? Past audit reports have c_iticized the Aqsncy's proclivity for zward:nq broad scope prise contracts. Moreover, when this epeo:fic cvntraat was awarded to ZCF, an Aqency cost analyst suqqested breaking it into aa4allar proeuremrnta in order to increase competition, and possibly obtain siqnilicant cost savinqs. However, such an approach was not selected under the theory that it would be better to consider such a break out when the follow-on contract was awarded. When the follow-on contract vas awarded, it went to ICr. The SPi case was unique because of the communications that :,ccurrsd between SPI and the EPA program otficial before the contract was avarded to ICl. However, it was not unique in that 1

5 it was a non-corinetitive procurement. In our ongoing review of several ICY prine contracts, we noted that most of the subcontracts were sole source awards to ICF "team° meabors. The tsams' members were approved by ZPA when the prime contracts were awarded. Then, wh.n IC!' choss to subcontract a task, EPA usually accepted that the procurement should be non-corpetitive because it was going to a team msmbar. Me did note one instance where ZCF solicited bids and proposals. The proposed subcontract's scope of work included providinq advice to senior EPA management, assistinq in mediating disputes, and racilititing issues related to amendmenta to the Clean Air Act. But it appeared that ICF vent to extraordinary lengths to favor selection of the ineumbent: o Price vas the least important criteria for award. The incumbent was the hicheat bidder, with a proposal 76% more than a firm deeaed almost as technically qualified. c The bulk of the incumbent's technical score used to juatify the award steasaied basically from the fact that the fira was the incur.:bent, and thus familiar with the "dynamics of the EPA program." On the other hand, the lowest bidder was severely penalized becausa its direct experience with snior EPA sanagemant was minimal. o ICF appeared to go out of its way to assist the incumbent, including advising the firm to delete clearly unallovable costs from its proposal, and by allowing it to submit several "best and final of=ers." o ICr boasted that its negotiations with the incumbent "saved" $44,000, omittinq the fact that award to a lower bidder could have saved $90,200. o Three of the eiqht resumea s.+boitted by the incumbent indicated that ths employees had formerly been employed by ICT. (7) Is this an instance of contractors doing inhersntly governmental work? The Or=ioe of Federal Procurement Policy defines an inherently governmental function as an activity that is so intimately related to the public interest as to mandate per=ormancs by government smployees. Such functions would include deciding governmental policy. In our opinion, the contractors were not performing inherently qoveramental work, because EPA made the decisions regarding th. smokinq policy and simply contracted with ICt and SPI to develop a Guide to implement EPA's establishsd policy.

6 Should your statf have any questions, please have tham ccntact P. Ronald Gandolfo, Divisional Inspector General for Audit. Mid-Atlantic Division, on (21S) 597-0497. sincaraiy, U John C. Martin