FAA overpaid sole-source contracts, says IG

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airplane against a cloud backdropContracting officers at the Federal Aviation Administration may have overpaid two sole-source contracts by $670,000 because they did not perform effective cost and price analysis, says the Transportation Department inspector general.

In a report dated May 19, auditors say they randomly examined 25 contracts awarded from April through December 2008 that were conferred without completion. The contracts were worth $44.8 million and the agency failed to perform effective cost and price analysis on eight of them, worth cumulatively $11.5 million, the audit states.

Auditors arrived that their overpayment conclusion in one case by finding out that a contracting officer in Oklahoma City mistakenly assumed that a proposal from a company selling en route high and low altitude and area air traffic control charts did not include general and administrative overhead costs. In fact, the proposal did, since it incorporated direct and indirect costs into a single overhead rate. However, the contracting officer recommended that the FAA give the contractor a profit rate of 30 percent in order to compensate the company for its supposedly unstipulated overhead costs. The FAA ended up awarding the company a $7.6 million contract, a figure $669,126 more than it should have been, the report states.

"The analyst later stated he had no experience reviewing indirect costs and that in his prior job he had relied on other price analysts to do such analysis," the report adds.

In the other case, auditors found that an FAA contracting officer gave a company a contract for an environmental assessment of the increased use of a crosswinds runway for $113,000. A comparison to rates listed on the General Services Administration schedules showed that the FAA could have paid about $12,000 less--maybe more, if it had negotiated the GSA list price downward, the report adds.

FAA officials told authors they've increased training on cost and price analysis.

For more:
- download the report, ZA-2011-089 (.pdf)

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