Wednesday, November 28, 2012

Federal Audit Slams Procurement Practices of Washington, DC Airports

A federal audit of the agency that operates the Reagan and Dulles airports in Washington, DC has found significant problems with the procurement and contracting practices of the Metropolitan Washington Airports Authority (MWAA).

The November1, 2012  audit follows on the tail of a May 2012 interim letter sent to MWAA by the U.S. Department of Transportation’s Office of the Inspector General. 

Audit concerns: The audit identified several red flags in how the MWAA deals with contracts.
  • Lack of Competition: MWAA contracts over $200,000 are required to be competitively procured, but the agency invoked exceptions to the competitive process for nearly two-thirds of such contracts, often without adequate or timely justifications.   The agency also 
“awarded out-of-scope contract modifications and task orders without required Board approval, placed large-value task orders without adequate justification, and distributed work on multiple-award contracts disproportionately.  These practices limit competition because they allow MWAA to procure significant new work on existing contracts that could be awarded competitively.”
  • Ethical concerns: Staff accepted gifts from contractors totaling at least $12,000, including Super Bowl tickets, travel, and accommodations, a fishing trip, a trip to New York City to attend a major league baseball game, trips to golf tournaments, concert tickets.  MWAA policies regarding conflicts of interest do not prevent Board members from exercising inappropriate influence in the contracting process.  Some contracts were awarded to former board members.  The audit also criticized the agency’s ineffective code of ethics and lack of training for employees on ethical issues. 
  • Poor contract management: In 27% of the contracts audited, MWAA allowed work to begin before the contract award date. 
Summary of audit findings:  The following are some of the headings from the audit report relating to procurement and contracting (the report also criticized MWAA for its personnel and hiring practices):
  • MWAA’s contracting policies and practices do not maximize competition
  • MWAA does not follow federal best practices to publicize and solicit contract opportunities
  • Out-of-Scope contract actions, unjustified task orders, and unbalanced work distribution on multiple-award contracts further limited competition
  • MWAA does not track employees with delegated procurement authority or ensure they stay within delegated limits
  • MWAA lacks controls to ensure employees follow key contracting policies and procedures
  • MWAA lacks a formal acquisition planning process and has not effectively managed the size and skill of its acquisition workforce
  • MWAA’s contracting policies and practices do not emphasize procurement integrity
  • MWAA lacks sufficient controls to detect and prevent nepotism
  • MWAA’s financial disclosure processes have not promoted full disclosure of conflicts of interest to ensure compliance with ethics provisions
  • MWAA did not require recurring formal ethics training for all employees
  • Board policies have not been sufficient to prevent potential conflicts of interest, but effectively implementing new policies may prevent future unethical behavior          
What's next: MWAA has indicated its willingness implement the audit's recommendations.
  • A new ethics code will take effect for board members on December 1, 2012 and for MWAA employees on January 1, 2013.
  • About a dozen non-competitive contracts awarded to former board members have been terminated.
Lessons learned:  The following highlights key procurement and contracting issues that public agencies should be aware of:
  • Procurement Policies:  Public agencies should have clear procurement and contracting policies that are communicated to all staff.
  • Ethical standards:  It is important for public agencies to build an ethical culture, driven by clear policies and by the example of key leadership that holds everyone in the agency accountable.
  • Training:  Regular training on contracting and ethical requirements is critical to ensure that the policies are actually implemented.
  • Avoid politicization of procurement:  Establishing a centralized procurement function and objective standards can help to depoliticize procurement and contracting issues and build transparency into the process.
Additional information:
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

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