District of Columbia: Procurement System Needs Major Reform	 
(19-JAN-07, GAO-07-159).					 
                                                                 
To improve acquisition outcomes, in 1997 the District established
the Office of Contracting and Procurement under the direction of 
a newly created chief procurement officer (CPO). Since then, the 
District's inspector general and auditor have identified improper
contracting practices. This report examines whether the 	 
District's procurement system is based on procurement law and	 
management and oversight practices that incorporate generally	 
accepted key principles to protect against fraud, waste, and	 
abuse. GAO's work is based on a review of generally accepted key 
principles identified by federal, state, and local procurement	 
laws, regulations, and guidance. GAO also reviewed District audit
reports and discussed issues with current and former District	 
officials as well as select state and local officials.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-159 					        
    ACCNO:   A65024						        
  TITLE:     District of Columbia: Procurement System Needs Major     
Reform								 
     DATE:   01/19/2007 
  SUBJECT:   Accountability					 
	     Competitive procurement				 
	     Contract administration				 
	     Contract oversight 				 
	     Contracts						 
	     Fraud						 
	     Internal controls					 
	     Municipal governments				 
	     Procurement law					 
	     Procurement planning				 
	     Procurement policy 				 
	     Procurement practices				 
	     Procurement regulations				 
	     Small purchases					 
	     Sole source procurement				 
	     State and local procurement			 
	     Transparency					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-07-159

   

     * [1]Results in Brief
     * [2]Background

          * [3]Amendment to the District's Procurement Law Aimed at Address
          * [4]Characteristics of an Effective Public Procurement System

     * [5]The District's Procurement Law Does Not Promote Transparency

          * [6]District Lacks a Procurement Law That Applies to All Entitie
          * [7]Other Exemptions in the Law Further Undermine Transparency a
          * [8]Other Provisions in the District's Procurement Law Create Ba

               * [9]Broad Authority for Sole- Source Contracting
               * [10]High Dollar Thresholds for Limited Competition Small
                 Purchas
               * [11]Reliance on Local Supply Schedule

          * [12]The District's Law Allows Payments for Unauthorized Commitme

     * [13]The District's Procurement System Does Not Reflect Sound Man

          * [14]Low-Level Position of the Office of Contracting and Procurem
          * [15]The District Lacks Other Tools for Effective Procurement Man

               * [16]The District Lacks a Procurement Manual to Guide Staff
               * [17]The District Lacks Professional Certifications for
                 Procureme
               * [18]The District's Integrated Procurement Data System Has
                 Yet to

          * [19]The District's Recent Actions to Address Its Procurement Man

     * [20]Conclusion
     * [21]Recommendations for Executive Action
     * [22]Agency Comments and Our Evaluation

          * [23]Home Rule Act
          * [24]Procurement Practices Act of 1985
          * [25]Procurement Reform Amendment Act of 1996

     * [26]GAO Comments
     * [27]GAO Contact
     * [28]Staff Acknowledgments
     * [29]GAO's Mission
     * [30]Obtaining Copies of GAO Reports and Testimony

          * [31]Order by Mail or Phone

     * [32]To Report Fraud, Waste, and Abuse in Federal Programs
     * [33]Congressional Relations
     * [34]Public Affairs

Report to the Ranking Minority Member, Committee on Oversight and
Government Reform, House of Representatives

United States Government Accountability Office

GAO

January 2007

DISTRICT OF COLUMBIA

Procurement System Needs Major Reform

GAO-07-159

Contents

Letter 1

Results in Brief 2
Background 4
The District's Procurement Law Does Not Promote Transparency,
Accountability, and Competition 11
The District's Procurement System Does Not Reflect Sound Management and
Oversight Practices 30
Conclusion 42
Recommendations for Executive Action 43
Agency Comments and Our Evaluation 46
Appendix I Scope and Methodology 48
Appendix II District Governance and Related Procurement Authorities 52
Appendix III Comments from the Chief Financial Officer for the District of
Columbia 59
Appendix IV GAO Contact and Staff Acknowledgments 66

Tables

Table 1: District Entities Procuring through the Office of Contracting and
Procurement as of October 2006 6
Table 2: District Procurement Law Provisions Permitting Sole-Source
Contracting and Awards in Fiscal Year 2005 under These Provisions 18
Table 3: Limited Competition Procedures for Small Purchases in the
District of Columbia 21
Table 4: DCSS Program Schedule Categories and Number of LSDBE Vendors (as
of October 27, 2006) 25

Figure

Figure 1: The Office of Contracting and Procurement Placement in the
District of Columbia's Government Structure 32

Abbreviations

ABA American Bar Association
CFO Chief Financial Officer
CPO Chief Procurement Officer
DCSS District of Columbia Supply Schedule
FAR Federal Acquisition Regulation
GSA General Services Administration
LSDBE Local, Small, and/or Disadvantaged Business Enterprise
MAS multiple award schedule
NASPO National Association of State Procurement Officials
OCTO Office of the Chief Technology Officer
PASS Procurement Automated Support System

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

United States Government Accountability Office

Washington, DC 20548

January 19, 2007

The Honorable Tom Davis
Ranking Minority Member
Committee on Oversight and Government Reform
House of Representatives

Information from the District of Columbia's lead contracting office and
other sources indicate that in fiscal year 2005, more than $1.8
billion--almost 22 percent of the city's $8.2 billion budget--was spent on
procurement. To maintain public trust and fulfill public policy
objectives, an effective procurement system should provide timely
acquisition of the right goods and services while efficiently addressing
agency needs and obtaining the best value for taxpayer dollars. The
success of any public procurement system is rooted in law and policies
with appropriate internal controls, which if adhered to through effective
management and oversight, promote transparency, accountability,
competition, and ultimately protect resources from fraud, waste, and
abuse.

The District's history of procurement problems--which include poor
planning, excessive use of sole source contracts, and unauthorized
personnel committing government resources--is well documented. Contracts
have suffered from poorly defined requirements, noncompliance with
procurement rules, and avoidance of competition. Almost 10 years ago in an
effort to improve its procurement outcomes and promote oversight and
accountability, the District amended its procurement law--the Procurement
Practices Act of 1985.1 A key component of the amendment was the
establishment of the Office of Contracting and Procurement to centralize
the District's acquisition function under the direction of a newly created
chief procurement officer (CPO). Since then, the District's inspector
general's and auditor's offices as well as numerous press reports continue
to identify improper contracting practices across various District
entities.2

1 The Procurement Practices Act of 1985, codified as amended in D.C.
Official Code S 2-301.01 et seq., is the District's primary procurement
law and is implemented through Title 27 of the District of Columbia
Municipal Regulation.

2 For purposes of this report, the term "entities" refers to the various
District departments, agencies, boards, and commissions.

Given these circumstances, you asked us to assess the District's
procurement system. Specifically, we examined the extent to which the
District's (1) procurement law incorporates generally accepted key
principles that promote transparency, accountability, and competition and
(2) procurement system reflects sound management and oversight practices.
Our assessment also addresses recent actions the District has taken to
address persistent procurement challenges.

To conduct our work, we reviewed the relevant District procurement laws
and regulations, and compared them with generally accepted key public
procurement principles and best practices from a variety of sources,
including the National Association of State Procurement Officials (NASPO),
the American Bar Association (ABA) model procurement code, the Federal
Acquisition Regulation (FAR) as well as our prior work on effective
procurement practices. To obtain perspectives from others on the
District's past and current procurement management challenges, we reviewed
various studies with recommendations that led up to the 1997
reorganization to establish the Office of Contracting and Procurement
headed by a CPO as well as selected District inspector general and auditor
reports since 2004. We interviewed current and former procurement,
executive, financial management, and auditing officials in the District to
discuss organizational, management, and policy challenges; procurement
reform; and related issues. We also spoke with state government
procurement leaders of NASPO about sound public procurement principles and
practices regarding public procurement and their views on issues we raised
about the District's system. In addition, we visited Atlanta, Baltimore,
and New York City to interview city procurement officials about their
views on issues we raised concerning the District's system and to learn
about related challenges they have faced and their responses to these
challenges. Appendix I presents our scope and methodology in more detail.
We conducted our work between February and October 2006 in accordance with
generally accepted government auditing standards.

Results in Brief

The District's procurement law as currently in effect generally does not
incorporate accepted key principles of sound procurement as established by
NASPO, the ABA model procurement code, and the FAR. As a result, the law
fails to adequately promote transparency, accountability, and competition
to reduce the risk of fraud, waste, and abuse. Although it recognizes the
role of a CPO--a key component of a comprehensive procurement law--the law
falls short in a number of other key areas. First, despite calling for
uniform procurement procedures District governmentwide, the law does not
apply to several District entities, including some that spend tens of
millions of dollars a year to contract for goods and services. According
to many officials we spoke with, this lack of uniformity severely hampers
transparency and accountability and increases the risk of preferential
treatment of vendors, discourages competition, and ultimately drives up
costs. Second, the law fails to provide authority to the CPO to
effectively carry out and oversee the full scope of procurement
responsibilities across all entities. Third, the law has frequently been
amended to grant exemptions to its provisions and the CPO's authority for
certain entities and special procurements. Current and former CPOs, as
well as NASPO and other city procurement officials, noted that these
exemptions distort the District's law, undermine efforts to establish a
central authority, and circumvent the competitive process. Finally, the
law allows the use of noncompetitive contracting methods, such as
sole-source contracting, under broad exceptions. It further allows higher
dollar thresholds for small purchases than are allowed in other city and
federal regulations, including the FAR; mandates the use of a District
supply schedule with a limited list of local vendors for purchases of a
specified threshold; and allows agencies under certain circumstances to
bypass the District's contracting rules to directly pay vendors without
valid contracts--payments that accounted for as much as $217 million in
fiscal year 2004. Ultimately, these provisions in the law create barriers
to competition--the basic tenet of an effective public procurement system.

In addition to generally lacking a law that reflects accepted key
principles of sound procurement, the District has been challenged to
effectively manage and oversee its procurement system. The low-level
position of the procurement office within the District's governmental
structure, combined with rapid turnover of five CPOs in the past 10 years,
has resulted in fragmented and inconsistent procurement management and
oversight with multiple players having authority to award contracts and
affect procurement decisions. According to former District CPOs, the low
organizational placement weakened their ability to direct, coordinate, and
oversee procurement activities across the District's entities. Each of the
appointed CPOs cited their lack of influence and control over the
acquisition function as a major reason for resigning their position before
the end of their tenure. At the same time, contracting and agency staff
and financial managers do not have the basic tools needed for effective
procurement management and oversight. Specifically, the District lacks a
procurement manual, a professional development program for contracting
staff, and an integrated procurement data system--key tools for guiding
District procurements and helping contracting and agency staff carry out
their responsibilities. Officials from the other cities we reviewed have
overcome similar challenges by reorganizing and elevating the acquisition
function within their city's governmental structure and implementing a
variety of tools to strengthen the procurement system's management and
oversight.

We are making a comprehensive set of recommendations to the Mayor of the
District of Columbia to seek reform of the District's procurement law and
system in order to help promote transparency, accountability, competition,
and minimize fraud, waste, and abuse. Our recommendations focus on
establishing a procurement system that incorporates key procurement
principles and practices identified by NASPO, the ABA model procurement
code, and the FAR. To help ensure the District takes action and sustains
improvements to its procurement system and to facilitate congressional
oversight, we are also recommending that the Mayor develop and submit to
Congress a comprehensive plan and schedule for carrying out major
procurement system reform in line with our recommendations.

After reviewing a draft of this report, the office of the outgoing Mayor
declined to comment.3 However, in oral comments, the new administration
indicated concurrence with most of our findings and recommendations and
intends to provide an action plan within 60 days of the public release of
this report. Although most of our recommendations are directed to the
Mayor's office, we also made recommendations to the Chief Financial
Officer (CFO). In written comments, the CFO disagreed with our findings
related to the use of direct vouchers for procurement-related
transactions. They are reviewing their policy on direct vouchers and we
encourage them to implement our recommendations as well as work with the
Mayor's office to coordinate procurement reform actions as applicable. The
CFO's comments are included in appendix III along with our comments.

Background

For fiscal year 2005, the District's Office of Contracting and
Procurement--its lead contracting office--reported conducting over 20,000
transactions valued at $1.2 billion on behalf of 55 District entities,
five of which accounted for $596 million (see table 1 for the departments,
agencies, and other entities reporting procurements through this office).
Over two-thirds of the District's procurement dollars managed through the
lead contracting office was spent on professional and public safety
services, human care, and road and highway construction. In addition, some
District entities, including the Board of Education for District of
Columbia Public Schools and the Department of Mental Health, procure
independently of the lead contracting office.4 According to information
available from District sources, these entities spent over $600 million in
fiscal year 2005.

3 On January 2, 2007, Anthony Williams ended his term and Adrian Fenty
began his term as Mayor of the District of Columbia.

4 According to the Office of Contracting and Procurement, the following
District entities procure independently of this office: Board of Education
(for the public schools); Office of the Chief Financial Officer; Child and
Family Services Agency; Washington Convention Center; District of Columbia
(D.C.) Council; D.C. Court System; D.C. Housing Authority; D.C. Housing
Finance Agency; D.C. Public Service Commission; D.C. Retirement Board;
Department of Mental Health; Pretrial Services Agency; Public Defender
Service; Sports Commission; and the Water and Sewer Authority. The Board
of Education is exempted from the Office of Contracting and Procurement in
soliciting, awarding, and executing contracts for the public schools,
except for security contracts that began on or after June 30, 2005 (D.C.
Official Code S 2-301.04(d)).

Table 1: District Entities Procuring through the Office of Contracting and
Procurement as of October 2006

Office of Administrative     Office of Employee     Office of Planning     
Hearings                     Appeals                                       
                                                       Office of Police       
Office on Aging              Department of Employee Complaints             
                                Services                                      
Alcoholic Beverage                                  Office of Property     
Regulation Administration    Energy Office          Management             
                                                                              
Commission on Arts and       Fire and Emergency     Public Employee        
Humanities                   Medical Services       Relations Board        
                                                                              
Office of the Attorney       Department of Healtha  Public Library         
General                                                                    
                                Department of Human    Department of Public   
Office of Boards and         Servicesa              Works                  
Commissions                                                                
                                Department of Housing  Board of Real Property 
Office of Cable TV and       and Community          Assessments and        
Telecommunications           Development            Appeals                
                                                                              
Office of Campaign Finance   Office of Human Rights Office of Risk         
                                                       Management             
Office of Chief Medical      Department of                                 
Examiner                     Insurance, Securities, Serve DC               
                                and Banking                                   
Office of the Chief                                 Department of Small    
Technology Officera          Commission on Judicial and Local Business     
                                Disabilities and       Development            
Office of the City           Tenure                                        
Administrator                                       Office of State        
                                Justice Grants         Education              
Department of the Consumer   Administration                                
and Regulatory Affairs                              Taxicab Commission     
                                Office of Labor                               
Office of Contracting and    Relations and          Department of          
Procurement                  Collective Bargaining  Transportationa        
                                                                              
Department of Corrections    Office of Latino       Office of Tuition      
                                Affairs                Assistance Grant       
Contract Appeals Board                              Program                
                                Metropolitan Police                           
Office of the Deputy Mayor   Departmenta            University of the      
for Children, Youth,                                District of Columbia   
Families and Elders          Office of Motion                              
                                Pictures and           Department of Youth    
Office of the Deputy Mayor   Television Development Rehabilitation         
for Operations                                      Services               
                                Department of Motor                           
Office of the Deputy Mayor   Vehicles               Office on Zoning       
for Planning & Economic                                                    
Development                  Executive Office of    Office of Personnel    
                                the Mayor                                     
Office of the Deputy Mayor                          Personal Property      
for Public Safety and        Office of the          Division               
Justice                      Neighborhood Action                           
                                                                              
Board of Elections & Ethics  Department of Parks                           
                                and Recreation                                
Emergency Management Agency                                                
                                Office of Partnerships                        
                                and Grants Development                        

Source: Office of Contracting and Procurement.

Note: GAO did not independently verify all the entities. We relied on
information provided by the Office of Contracting and Procurement and did
some limited reliability assessment through the course of our work and
found the information to be sufficiently reliable for our purposes. Of the
entities served by the Office of Contracting and Procurement, 55 provided
fiscal year 2005 procurement data.

aOne of the top five spending agencies in fiscal year 2005 in terms of
millions of dollars spent on procurement. Specific reported amounts in
procurement spending were $180 million (Department of Transportation);
$123 million (Office of the Chief Technology Officer); $123 million
(Department of Health); $110 million (Department of Human Services); and
$59 million (Metropolitan Police Department).

The District also has special requirements related to being the seat of
the federal government. The fiscal relationship between the federal
government and the District as well as city governance have been perennial
questions for Congress, and the District's local autonomy has evolved
significantly in the last 30 years.5 In 1973, Congress enacted the
District of Columbia Self-Government and Governmental Reorganization Act
or Home Rule Act,6 which established the structural framework of the
current District government. The Home Rule Act allowed for an elected
Mayor and a council with certain delegated legislative powers. However,
Congress explicitly reserved legislative authority over the District.7 The
Home Rule Act generally provides a framework and processes for Congress to
enact, amend, or repeal any act with respect to the District. Congress
used this authority in the 1990s to enact laws intended to restore the
city to financial solvency and improve its management in response to a
serious financial and management crisis.8 Since the 1870s, the federal
government has made financial contributions to the District's operations.
In fiscal year 2006, federal government appropriations included $603
million in special federal payments to the District with $75 million for
elementary, secondary, and post-secondary education initiatives.9

5 Appendix II provides more details on District governance and related
procurement laws.

6 Pub. L. No. 93-198, (1973).

7 U.S. Constitution, Art. I, Section 8, Clause 17 provides authority for
Congress with respect to governance of the District.

8 For example, the District of Columbia Financial Responsibility and
Management Assistance Act of 1995 created a temporary federal control
board, which supplanted most of the elected Mayor's powers and established
the authority to review and approve all legislation passed by the Council;
it also created a Chief Financial Officer (CFO) and added powers to the
District's inspector general. In September 2001, the control board
suspended its authority. In 2006, the 2005 District of Columbia Omnibus
Authorization Act includes provisions to permanently establish the CFO
office and require the CFO to prepare annual budget submissions. Pub. L.
No. 109-356, S 201, amending S 424 of the Home Rule Act.

9 Transportation, Treasury, and Housing and Urban Development, the
Judiciary, the District of Columbia, and Independent Agencies
Appropriations Act, 2006, Pub. L. No. 109-115 (2005). For more information
on the District's fiscal relationship with the federal government, see
GAO, District of Columbia: Structural Imbalance and Management Issues,
[35]GAO-03-666 (Washington, D.C.: May 22, 2003).

Amendment to the District's Procurement Law Aimed at Addressing Reported
Challenges

In 1997, the council, with the Mayor's approval, amended the District's
procurement law to centralize procurement under one contracting office,
which would be the exclusive contracting authority for all procurements
covered under the act.10 The amendment also authorized the Office of
Contracting and Procurement to be headed by a CPO who would be appointed
by the Mayor for a 5-year term, with the advice and consent of the
council, and could only be removed from office for cause. The CPO was
required to have no less than 7 years of procurement experience in
federal, state, or local procurement. The CPO, by delegation of the Mayor,
was given the exclusive contracting authority for all procurements covered
under the law.

The amendment was enacted around the same time that various procurement
studies were published, with one describing procurement in the District as
"in crisis"--as evidenced by over 600 contracts expiring in 90 days and a
rushed response to ensure that vital services were not interrupted. The
studies reported that procurement processing was inconsistent and
responsibilities were widely distributed across the District; training for
procurement personnel was insufficient and few were professionally
certified; agencies maintained separate databases; and there was no
acquisition planning process to define needs.11 Centralization under the
CPO's office was expected to improve the quality of the District's
procurement operations by promoting accountability, decreasing procurement
costs, eliminating duplication of effort, and increasing financial control
and performance. In particular, it was reported that centralization of the
acquisition function could allow the District to spend money more
effectively by promoting more competition and through bulk purchases of
goods and services used by multiple agencies.

Despite the expected benefits, the District's inspector general's and
auditor's offices continued to identify deficiencies across the District's
procurement system that frequently produce negative impacts on the
integrity and operations of the District. Moreover, for the past 5 years,
the inspector general's annual reports have cited procurement as a
significant area of concern due to lapses in contracting operations
resulting in costly inefficiencies, fraud, waste, and abuse. Some of the
persistent problems reported by District auditors and inspectors include
the following--many of which are similar to those that prompted the 1997
law:

10 D.C. Law 11-259, effective April 15, 1997. The law expanded the
procurement law's application to include independent agencies--which were
previously excluded--and applied it to all departments, agencies,
instrumentalities, and employees of the District government.

11 These studies also found that the District's contracts suffered from
insufficient funding; deficient specifications; vague and conflicting
delivery requirements; inadequate proposal evaluations and cost analysis;
long processing times after bid opening; lack of documentation supporting
technical scores; and no justification for sole-source contract awards and
technical evaluation plans.

           o Outdated procurement law and regulations that fail to
           effectively address long-standing procurement deficiencies,
           policies, and procedures for all aspects of the process
           specifically in the areas of solicitation, awarding, and
           monitoring of contracts.

           o Lack of continuity in procurement law, policies, and procedures
           as applied to some agencies.

           o Noncompliance with procurement law and regulations, and lax
           accountability over individuals for not complying with the
           District's guidelines.

           o Ineffective competition and overuse and misuse of sole-source
           contract awards.

           o Unauthorized commitments and purchases by District personnel
           from vendors without valid written contracts.

           o Failure to conduct advanced planning for known projects and
           procurement requirements that lead to costly sole-source
           acquisitions often based on faulty justifications.

           o Insufficient independent oversight of agencies that expend
           significant resources for information technology, construction,
           and communication projects.

           o Managers not ensuring a sufficient number of experienced
           procurement personnel, proper training, and certification of
           procurement workforce.

Characteristics of an Effective Public Procurement System

The objective of a public procurement system is to deliver on a timely
basis the best value product or service to the customer, while maintaining
the public's trust and fulfilling public policy goals. The federal
government achieves this through guiding principles established in the
FAR. NASPO and the ABA model procurement code have also established key
guiding principles and practices that are generally accepted and should be
incorporated into an effective procurement system. In addition, our work
has identified best practices and other accepted elements that are
essential for an efficient and accountable acquisition function. Key
characteristics of a successful procurement system include:

Transparency--Comprehensive procurement law with clear and written
policies and procedures that are understood by all sources.

Accountability--Clear lines of procurement responsibility, authority, and
oversight. State and local governments recommend the CPO have full-time,
sole, and direct responsibility for the procurement program.

Integrity--Public confidence earned by avoiding any conflict of interest,
maintaining impartiality, avoiding preferential treatment for any group or
individual, and dealing fairly and in good faith with all parties.

Competition--Specifications that do not favor a single source and
solicitations widely publicized to benefit from the efficiencies of the
commercial marketplace.

Organizational Alignment and Leadership--Appropriate placement of the
acquisition function in the organization to cut across traditional
organizational boundaries with stakeholders having clearly defined roles
and responsibilities. For state and local governments to operate
effectively, recommended practice is central leadership in the executive
branch.

Human capital management--Competent workforce responsive to mission
requirements, with continued review and training to improve individual and
system performance.

Knowledge and information management--Technologies and tools that help
managers and staff make well-informed acquisitions decisions.

The District's Procurement Law Does Not Promote Transparency, Accountability,
and Competition

The District lacks a uniform procurement law that applies to all District
entities and that provides the CPO with adequate authority and
responsibility for the entire acquisition function--an essential component
to promoting transparency, accountability, and competition. In addition,
the law has been amended to exempt certain District entities and
procurements from following the law's competition and other requirements.
According to current and former District procurement officials, District
entities are seeking to expand independent procurement authority--a move
that would undermine attempts to establish a central authority. Finally,
the law limits competition by broadening the exceptions under which
sole-source contracts can be awarded; authorizing dollar thresholds for
small purchases that are higher than those provided for in other city and
federal government procurement regulations, including the FAR; requiring
the use of a local supply schedule with limited vendors for a variety of
goods and services; and encourages agencies under certain circumstances to
bypass contracting rules to directly pay vendors without valid written
contracts. In contrast, other cities' procurement laws emphasize the
competitive process and having a strong centralized authority for their
CPOs in order to safeguard the integrity of their procurement systems.

District Lacks a Procurement Law That Applies to All Entities and Provides Clear
Authority to the CPO

Contrary to sound procurement principles and practices as identified by a
variety of sources, the District lacks a uniform procurement law that
uniformly applies to all District entities and provides clear authority to
the CPO. To promote transparency, accountability, and maintain integrity
of public procurement, NASPO and the ABA model procurement code for state
and local governments describe concepts for creating a uniform procurement
law that provides for central management of the entire procurement system
and broad discretion and authority to a CPO to implement policies.
Similarly, in the federal procurement system, the FAR establishes uniform
policies and procedures for acquisition by most executive agencies under
the President. Without such a foundation, the District's procurement
system is vulnerable to poor acquisition outcomes and less capable of
maintaining public trust.

Twelve District entities, including the Water and Sewer Authority and
Housing Authority, are not under the authority of both the District's
procurement law and Office of Contracting and Procurement, and are allowed
to follow their own procurement rules and regulations.12 In many cases,
the procurement law specifically exempts these entities from following the
law, which is contrary to the central statutory purpose of the District's
procurement law to (1) eliminate overlapping or duplication of procurement
activities; (2) improve the understanding of procurement laws and policies
by organizations and individuals doing business with the District
government; and (3) promote the development of uniform procurement
procedures governmentwide. As a result, the District's law has created a
procurement environment where some entities follow different rules and
practices, undermining the District's ability to capture an overall view
of its procurements as well as placing an added burden on vendors to
understand how to do business with the District.

According to NASPO, it is essential to have one uniform law that applies
to all agencies and their procurements and exclude blanket exemptions for
any executive agency or department. If exclusions are necessary, the law
should define them narrowly by types of goods and services procured. NASPO
state procurement leaders we spoke with said that they would be unable to
effectively run their own procurement systems without one governing law.
Without it, vendors are discouraged from competing since they do not know
what rules apply, which increases the risk that taxpayers pay more for
goods and services. According to several former and current CPOs in the
District, not having a uniform procurement law that governs all entities
has been problematic in ensuring transparency, accountability, and
oversight. Officials from other cities we reviewed agreed that having a
common procurement framework is critical for ensuring transparency and
integrity in the procurement system. Atlanta, for example, has one
procurement law that governs all agencies, which allows agencies, vendors,
and contracting employees to have a clear and consistent view of how
procurements should take place.

The law also fails to provide a service agency that would be the exclusive
contracting agency for all District procurements under the Mayor's
direction. NASPO calls for a centralized procurement official with the
authority and responsibility to, at a minimum, develop standardized policy
and procedure, delegate procurement authority to executive agencies,
provide expert assistance and guidance on procurement issues, and oversee
the acquisition process. While the statutory purpose of the 1996 amendment
to the procurement law was to centralize procurement in the Office of
Contracting and Procurement headed by a CPO, the law does not give the CPO
sole authority over the full spectrum of procurement activities in the
District. For example, although the law allows the CPO to delegate
procurement authority to employees of District entities covered under the
law and to the CPO's own staff in the Office of Contracting and
Procurement, the council, with the Mayor's approval, has used its
authority to pass emergency laws exempting entities and procurement
actions from the CPO's authority.13

12 The D.C. Housing Authority is exempt from the authority of the Office
of Contracting and Procurement and the District's procurement law, except
for the provisions regarding the jurisdiction of the Contract Appeals
Board for contract protests, appeals, and claims arising from procurements
of the Housing Authority. D.C. Official Code S 2-303.20 (m).

The council's use of its emergency act authority has been problematic in
certain cases where it exempted District entities from conducting their
procurements through the CPO's office. For example, in October 2006, the
council amended the procurement law to provide the District's Board of
Library Trustees procurement authority independent of the Office of
Contracting and Procurement and the District's procurement law--contingent
upon the board issuing its own procurement regulations--except for
provisions pertaining to contract protests, appeals, and claims.14 A
senior official in the Office of Contracting and Procurement said that
circumventing the CPO's authority in this case was not a solution largely
because the library board trustees do not have the contracting experience
or staff to exercise the new authority.15 NASPO recognizes that to ensure
the appropriate level of transparency and accountability and to preserve
the integrity of the procurement system, it is critical that the CPO have
sole responsibility for delegating procurement authority.

13 A permanent act requires approval of both houses of Congress while an
emergency act, which is only effective for 90 days or less, does not.
Appendix II provides more information on the District's laws and
procedures.

14 Other amendments to the law between 2000 and 2005 exempted the District
of Columbia Public Schools, Department of Mental Health, and Child and
Family Services Agency from the CPO's office in order to give them
independent procurement authority. D.C. Official Code S 2-301.04, D.C.
Official Code S 2-303.20.

15 According to a District official involved, the board asked the Mayor
for independent procurement authority because, in its view, the CPO's
office could not support the libraries' contracting needs. However, this
advocate also acknowledged that the board lacked the expertise needed and
indicated that the board intends to outsource the entire procurement
function.

According to the District's current and former CPOs, agencies and the
council are pushing to expand independent procurement authority through
exemptions. These efforts, if successful, could further undermine efforts
to establish a central authority--a key objective of the procurement law
amendment more than a decade ago. NASPO state procurement leaders as well
as current and former CPOs in the District told us that this is a move in
the wrong direction and that amendments to the procurement law should only
be made to introduce more effective procurement methods or when current
laws no longer make sense.

In addition to authorizing agencies to award their contracts independently
of the CPO, the council has eliminated the CPO's sole authority to debar
or suspend contractors from future contracts for various reasons, such as
conviction of certain offenses.16 In 2003, the council eliminated this
authority after the then-CPO debarred one vendor who pleaded guilty in
federal court to conspiracy in giving cash bribes to District public works
officials in return for falsified orders for asphalt-delivery.17 Prior to
this time, the procurement law gave the CPO sole authority for suspensions
and debarments. According to both a former CPO and a current senior
procurement official who were involved in this case, the procurement law
was amended to establish an interagency suspension and debarment panel
that reconsidered the CPO's decision in this case as well as made final
decisions in all future cases.18 After the panel's reconsideration, the
vendor was allowed to resume doing business with the District. To ensure a
strong, central procurement system, NASPO recommends that CPOs have sole
authority to implement a range of remedies for poor vendor performance,
including suspension and debarment.

16 A suspension is a temporary exclusion of a contractor from
consideration for award of contracts or subcontracts based on certain
convictions, judicial determinations of certain contract violations, or
charges of certain offenses. D.C. Official Code S 2-308.04. A debarment
may be a 3-year exclusion from consideration based on these circumstances.
Under the FAR, agency heads or designees (debarring or suspending
officials) rather than contracting officers make debarment and suspension
decisions. FAR9.403. The FAR provides discretion to officials in
developing a suspension and debarment decisions. FAR 9.406-1(a).

17 The Debarment Procedures Emergency Amendment Act of 2004, D.C. Law
15-327 (codified at D.C. Official Code S 2-308.04).

18 The interagency suspension and debarment panel was established in 2003
and includes the CPO as well as representatives from the offices of the
CFO and labor relations and collective bargaining; deputy Mayors for
planning and economic development and operations; and agencies deemed
affected by the proposed action against a vendor.

Other Exemptions in the Law Further Undermine Transparency and CPO Authority

The council, with approval from the Mayor, has further amended the law to
exempt temporarily or permanently certain agencies from following the
procurement law's requirements for competition or conducting their
contracts through the CPO. For example, in June 2006, the council exempted
the Director of the Department of Health from following the competition
and other requirements of the procurement law and allowed the Director to
select and contract with a vendor for an air quality study of the
Lamond-Riggs park within 30 days.19 In another case, in June 2006, the
council, with the Mayor's approval, exempted the Office of Contracting and
Procurement from following its procurement law for awarding a construction
contract on behalf of the Department of Youth Rehabilitation Services for
a youth center at Oak Hill.20 A senior District procurement official told
us that despite this exemption, the office intends to award competitively.

According to senior procurement officials in the CPO's office, entities
seek exemptions believing that working through the CPO or the competitive
process required by the law takes too much time.21 Current and former
District officials noted that in giving some entities their own temporary
procurement authority through exemptions in the law, the council and Mayor
have, in effect, created a culture of resistance to centralized management
and oversight of the acquisition function. One senior District procurement
official told us that such exemptions also create inequities among
agencies; explicitly discourage competition--contrary to the statutory
purpose of the law;22 and occasionally show preferences for certain
agencies and vendors. A former District executive and former CPO told us
that such exemptions have over time distorted the procurement law and made
it difficult for any vendor interested in doing business with the District
to understand how and to whom the procurement law applies. Further, it is
questionable why the council would use emergency act authority to make
noncompetitive awards given that the procurement law and implementing
regulation already establish procedures for these types of procurements.23

19 Lamond-Riggs Air Quality Study Temporary Act of 2006. D.C. Law 16-113.

20 The Oak Hill Construction Streamlining Temporary Amendment Act of 2006.
D.C. Law 16-136.

21 In addition, District procurement officials told us of the inability of
these agencies to effectively carry out their temporary delegations of
procurement authority as demonstrated by the agency heads seeking informal
assistance from the CPO's office. These officials told us that the CPO's
office helps the agencies prepare the contracts for award, but does not
sign the awards because they would not be authorized to do so.

22D.C. Official Code S 2-301.01(a)(2).

NASPO state procurement officials we spoke with voiced concerns over
exemptions that would give certain agencies the authority to operate under
their own rules or no rules at all and jeopardize the integrity of their
public procurement system. Moreover, they said that such exemptions
further undermine the CPO's authority over the District's procurement
system and ability to develop consistent procurement policy. Other cities
we reviewed have faced similar challenges with what they called "political
influence" in the procurement process. New York's CPO told us the city
council plays no role in making procurement policy and under no
circumstances would the council be allowed to pass exemptions to the
city's procurement law similar to those passed in the District.

Other Provisions in the District's Procurement Law Create Barriers to
Competition

Long-standing procurement principles, policies, and procedures implemented
in the FAR24 and recommended by NASPO and the ABA model procurement code
recognize that maximizing the use of competition ensures governments
receive the best value in terms of price and quality. According to a
procurement law expert who participated in a GAO forum on federal
acquisition challenges and opportunities,25 contractor motivation to excel
is greatest when private companies, driven by a profit motive, compete
head to head in seeking to obtain work.26 Consistent with this fundamental
principle, the District's procurement law mandates that full and open
competition is the preferred acquisition method. However, certain
provisions in the District's procurement law have resulted in a public
procurement system that emphasizes flexibility and speed over competition.
Specifically, the law (1) authorizes sole- source contracting under broad
provisions, (2) establishes higher dollar thresholds for limited
competition small purchases than are allowed in other cities or the FAR,
and (3) mandates the use of a local supply schedule with a limited number
of vendors--each of which permits use of streamlined acquisition methods
for high dollar procurements that result in limited or no competition.

23 The D.C. Council can introduce emergency legislation when there is a
situation that adversely affects the health, safety, welfare, or economic
well-being of a person for which legislative relief is deemed appropriate
and necessary by the council, and for which adherence to the ordinary
legislative process would result in delay that would adversely affect the
person whom the legislation is intended to protect. Similarly, the
procurement law and implementing regulations allow the contracting officer
to make an emergency procurement when there is an imminent threat to the
public health, welfare, property, or safety under emergency conditions.
D.C. Official Code S S 2-303.12(a)(1) and 2-303.05(a)(4) and as
implemented by 27 DC ADC 1710-10.2.

24 The Competition in Contracting Act of 1984, Pub. L. No. 98-369 requires
all acquisitions, with some exceptions, to be made using full and open
competition. FAR part 6 provides seven exceptions to full and open
competition.

25 GAO, Highlights of a GAO Forum: Federal Acquisition Challenges and
Opportunities in the 21st Century, [36]GAO-07-45SP (Washington, D.C.: Oct
6, 2006).

26 Professor Steven L. Schooner, Desiderata: Objectives for a System of
Government Contract Law, Public Law and Legal Theory Working Paper No. 37,
George Washington University Law School (Washington, D.C.: 2002).

  Broad Authority for Sole- Source Contracting

Both NASPO and the FAR recognize that circumstances sometimes make it
difficult or impossible to conduct formal competitive procurements and
that in such cases, the use of sole-source procurements is warranted.
However, NASPO and the FAR also recognize that such procurements should
only be permitted under narrowly defined conditions27 and should always be
properly justified.28 They state that to ensure transparency in these
types of procurements, the law should also require legal notice of intent
to initiate a sole-source procurement over a determined dollar value.
While recognizing there are situations in which competition must and
should be limited, NASPO states that artificially restricting competition
when competition is possible defeats a central tenet of public
procurement.

Rather than restrict the conditions under which sole-source procurements
can occur, the District's procurement law has been amended--as recently as
2002--to expand exceptions to full and open competition. 29 Although
complete data District-wide on sole-source contracting are unavailable,
over 14 percent--or $173 million--of the fiscal year 2005 reported
procurement spending through the Office of Contracting and Procurement was
on a sole-source basis. Of the District's various sole-source provisions,
three account for the majority of sole-source contracts and spending (see
table 2). Of the three provisions, one is similar to an equivalent
provision in the FAR, while the remaining two provisions have no
equivalent. Senior procurement officials and former CPOs pointed out that
these provisions in the procurement law establish a wide range of
circumstances to bypass competition.

27 Such conditions include when there is only one vendor of a necessary
good or service or during a declared emergency.

28 To prevent the misuse of sole source provisions, the FAR and District
procurement regulations describe explicit limitations on each exception.
For example, both procurement regulations state that sole-source contracts
shall demonstrate the authority under which they are awarded and shall not
be awarded on the basis of a lack of advance planning or the pending
expiration of program funds. The District's regulation also requires that
contracting officers avoid using sole-source procurement except when it is
both necessary and in the best interests of the District.

29 The Procurement Practices Negotiated Pricing Amendment Act of 2001,
effective March 19, 2002, amended section 2-305.05 (a) of the procurement
law to establish the (3A) provision. (D.C. Law 14-083; D.C. Official Code
S 2-305.05 (a)(3A) et seq.).

Table 2: District Procurement Law Provisions Permitting Sole-Source
Contracting and Awards in Fiscal Year 2005 under These Provisions

Dollars in                                                                 
millions                                                                   
                                               Number of                      
                  Criteria or circumstance   sole-source       Dollar valueof 
Procurement    justifying sole-source       contracts sole-sourcecontracts 
law provision  contracting                    awarded              awarded 
S 2-303.05 (a) Only one supplier (single                                   
(1)            available source) can                                       
                  provide the good or                                         
                  service requested                  296                $79.4 
S 2-303.05 (a) The contract is with a                                      
(3)            vendor who maintains a                                      
                  price agreement or                                          
                  schedule with any federal                                   
                  agency                             283                 88.9 
S 2-303.05 (a) The contract is with a                                      
(3A)           vendor who agrees to adopt                                  
                  the pricing of a vendor                                     
                  who maintains a price                                       
                  agreement or schedule with                                  
                  any federal agency                 119                  3.6 
S 2-303.05 (a) Procurements that would                                     
(4)            ordinarily be purchased on                                  
                  a competitive basis, but                                    
                  an emergency has been                                       
                  declared                             2                  1.3 
Total                                             700               $173.2 

Source: GAO analysis of information from the Office of Contracting and
Procurement on sole-source contract awards.

Note: Complete data are not available on sole-source contract awards in
2005 for all of the District's organizations, such as the public schools
or Department of Mental Health.

Over 40 percent of the District's fiscal year 2005 sole-source contracts
were awarded under provision (a)(1), which similar to an equivalent FAR
provision, requires agencies to justify that there is only one available
source for a good or service.30 Of the 296 contract awards under this
provision, 45 percent were made by the Office of the Chief Technology
Officer (OCTO) for a variety of information technology and
telecommunication services. According to NASPO officials we spoke with,
typically more than one vendor in the commercial marketplace provides
these services and the services would normally be competed. In 2005, the
District's inspector general reported on questionable single available
source justifications involving information technology services.31
According to the inspector general, there were numerous competing firms
that could have satisfied the District's needs for eight selected single
available sole-source contracts they reviewed. For three sole-source
contracts for general purpose commercial information technology equipment,
software, and service, the inspector general found that there were 700
vendors eligible to compete through the District's supplier database and
another 113 vendors located in the District eligible to compete through
the federal supply schedules. Overall, the inspector general concluded
that the District could have potentially saved at least $589,000--over 24
percent--of the $2.5 million for the sole-source contracts awarded.

More than half of the fiscal year 2005 sole-source contracts were awarded
through the (a) ( 3) and (a) (3A) provisions, which permit agencies to
award sole-source contracts to any vendor who agrees to charge according
to a schedule of prices for federal agencies. Unlike the District's single
available source provision, these provisions have no equivalent in the FAR
or NASPO and ABA procurement guidance for state and local governments.
According to a senior District procurement official, these two procurement
law provisions were intended to save time in the District's procurement
process by piggybacking off the prices previously set as a result of the
prior competition--primarily contracts awarded to District and other
vendors under the General Services Administration's (GSA) multiple award
schedule (MAS) program. The use of sole-source provisions as a time-saving
measure appears to conflict with the District's own procurement
regulations, which calls for contracting officers to avoid sole-source
procurements except where necessary.

30 FAR 6.302-1 states that an executive agency need not provide for full
and open competition when the supplies or services required are available
from only one responsible source and no other type of supplies or services
will meet the agency requirement. The FAR provision defines a very limited
number of circumstances under which a supply or service may be considered
to be available from only one responsible source and provides detailed
written justification and certification requirements. As implemented in
the District's procurement regulations, the law's single available source
provision states that a contracting officer may award a contract by using
noncompetitive negotiation upon making a determination and findings that
there is only one available source for a supply, service, or construction
and that the District's minimum needs can only be met by this source.

31 Office of the Inspector General, Government of the District of
Columbia, Audit of Contracting Actions for the District's Administrative
Services Modernization Program, OIG No. 04-1-12MA (Washington, D.C.: May
3, 2005).

GAO's work has also found that while MAS has provided the federal
government with a more flexible way to buy commercial items and services,
contract negotiators do not always use the full range of tools to ensure
the government effectively negotiated prices.32 As a result, the federal
government has missed opportunities to save millions of dollars in
procuring goods and services. By eliminating competition altogether and
awarding sole-source contracts to vendors based on MAS pricing, the
District may be similarly missing significant cost-saving opportunities.
Moreover, the District may be at greater risk because its sole-source use
of the federal supply schedule is not subject to the FAR,33 and the
District's implementing procurement regulation does not provide specific
guidance on the use of the (a)(3) and (a)(3A) provisions.34 A senior
procurement official we spoke with noted that the CPO's office recently
started requiring District contract officers to additionally justify their
use of these methods after growing concerned about the large number of
sole source contracts being awarded.

To ensure they get the best value for the taxpayer dollar, other cities we
reviewed have taken steps to emphasize competition over sole source. These
officials recommended that a procurement law--similar to statutes
implemented in the FAR--narrowly define sole-source contracting and
require that such actions be properly justified and documented. For
example, in Atlanta, sole-source contracts may only be awarded when the
CPO determines after conducting a good-faith, due diligence review of
available sources that there is only one available source for the required
good or service. Even for emergencies, Atlanta's procurement law requires
the CPO to use competition to the maximum extent practicable, and sole
source may only be considered in the case of a threat to public health,
welfare, or safety. According to Atlanta's CPO, in fiscal year 2005, only
five sole-source contracts were awarded. Similarly, New York's procurement
rules specify only one condition or circumstance in which sole-source
contracting is permitted for purchases above $5,000; there is only a
single available source and competition is not possible.

32 GAO, Contract Management: Opportunities to Improve Pricing of GSA
Multiple Award Schedules Contracts, [37]GAO-05-229 (Washington, D.C.: Feb.
11, 2005) and Contract Management: Opportunities Continue for GSA to
Improve Pricing of Multiple Award Schedules Contracts, [38]GAO-05-911T
(Washington, D.C. July 26, 2005).

33 FAR 8.4 sets forth substantial procedures for federal agencies' use of
the multiple award schedules contracts to procure goods and services. For
instance, in procurements exceeding the micro-purchase threshold--$3,000
with certain exceptions--the FAR requires ordering activities to place
orders with the schedule contractor that represents the best value;
requires ordering activities to seek price reductions; and sets forth
minimum documentation requirements. In procurements for services that
require a statement of work, the FAR requires the ordering activity to
create a request for quotation; provide it to schedule contractors; and
evaluate each response received before making the order.

34 Though the District's procurement regulation does not provide specific
guidance for the use of the (a)(3) and (a)(3A) provisions, it does require
a general determination and findings to justify use of sole-source
authorities.

  High Dollar Thresholds for Limited Competition Small Purchases

For purchases under a certain dollar threshold, the administrative costs
to formally compete may outweigh the benefits of competition. In such
cases, procurement systems may permit streamlined acquisition procedures
with limited competition for purchases not exceeding a specified dollar
threshold. 35 In the District, small purchase procedures streamline the
process by limiting competition to oral or written price quotes from only
a few vendors, or eliminating competition altogether (see table 3).

Table 3: Limited Competition Procedures for Small Purchases in the
District of Columbia

Small purchase threshold       Small purchase procurement procedure        
Less than or equal to $10,000  Contracting officer may make                
                                  non-competitive procurement                 
Above $10,000 and less than or Contracting officer must obtain three oral  
equal to $25,000               price quotes                                
Above $25,000 and less than or Contracting officers must obtain three      
equal to $100,000              written quotes                              

Source: Office of Contracting and Procurement.

Note: For OCTO and the Metropolitan Police Department purchases, the small
purchase threshold for no-bid procurement is less than or equal to
$25,000. For purchases over $25,000, the contracting officer must get
three written quotes.

For the District, a series of legislative changes since 1985--when the
small dollar threshold for small purchases was $10,000--have increasingly
raised the threshold for some entities, expanding the opportunities to
limit competition. Currently, the District's small purchase threshold is
$500,000 for OCTO and the Metropolitan Police Department and $100,000 for
all other entities. 36 The District's small purchase authority allows for
somewhat larger limited competitive purchases than that authorized in the
FAR. Under the FAR's micro-purchase authority, competition is not required
for purchases up to $3,000 when the contacting officer determines that the
price is reasonable. For small purchases between $3,001 and $100,000, the
FAR's simplified acquisition procedures require that the contracting
officer promote competition to the maximum extent practicable. Generally,
the contracting officer should consider obtaining at least three price
quotes or offers from sources within the local area and evaluating those
to determine the most advantageous to the government. Under the District's
small purchase authority, competition is not required for purchases up to
$10,000 when the contracting officer determines that the purchase is in
the best interest of the District. Moreover, contracting officers in the
District are allowed to waive the competitive small purchase procedures
under broad circumstances--such as time constraints and lack of available
sources--when it is impractical to obtain the required number of quotes.

35 Section 13.003 of the FAR provides guidance on federal small purchase
thresholds.

In fiscal year 2005, over 75 percent of the District's procurements
through the Office of Contracting Procurement were for small purchases
totaling $163 million. However, small purchase procurements could increase
in the future. According to one senior District procurement official,
there is a move to increase the small purchase threshold from $100,000 to
$500,000 for all agencies--a limit five times as high as that prescribed
in the FAR. State and city procurement officials voiced concern that the
District would consider this change in an effort to expedite procurements
by allowing limited competition methods. 37 NASPO state procurement
officials we interviewed were surprised at how high the District's small
purchase thresholds were set, and viewed this as one of the procurement
law's major barriers to competition. Each of these officials said that
they consider such amounts to be large purchases, particularly at the
$500,000 level. As one senior procurement official in the District put it,
"just about anything can be considered a small purchase in the District."

36 The Procurement Practices Act of 1985 established the small purchase
threshold at $10,000 for all District agencies. In 2002, the District
amended the procurement law to include a small purchase threshold of
$500,000 for the Metropolitan Police Department and OCTO and $100,000 for
all other departments, agencies, and instrumentalities. D.C. Official Code
S 2-303.21.

37 According to NASPO, the dollar thresholds for triggering the formal
competition process for non-small purchases have increased over the years;
yet, most states require some competitive quotations for small dollar
procurements. NASPO's small purchasing procedures call for soliciting a
minimum of three oral or written quotations to afford the best practice
and to ensure price comparisons.

Other cities we reviewed see the economic and quality benefits of
competition when larger procurements are involved, such as those the
District considers small purchases. In Atlanta, for example, the small
purchase threshold is $20,000 and New York, which spends over $11 billion
per year on procurement, only recently increased its small purchase
threshold to $100,000. According to the Atlanta CPO, raising small
purchase limits across the board ultimately compromises the integrity of
the procurement system by reducing transparency over procurement decisions
and source selection. One District official remarked that, if these types
of changes continue in their current direction, the District will no
longer have a recognizable procurement system.

  Reliance on Local Supply Schedule

The District of Columbia Supply Schedule (DCSS) program also limits
competition by restricting the pool of vendors for a variety of goods and
services to local companies; requiring entities to use the schedule as a
first source for all procurements $100,000 and below; and allowing limited
competition for purchases over $100,000--to a ceiling as high as $10
million for certain services. At the same time, there is no mechanism in
place to ensure that the incumbent vendor does not receive all DCSS
contracts for a particular schedule. NASPO has recognized that balancing
the need to promote socioeconomic goals with the need to ensure maximum
competition is an ongoing challenge. However, NASPO recommends caution in
the use of supply schedule programs, such as the DCSS, because while there
is the presumption of best value, competition among vendors is often
limited with no incentive to offer best price.

The DCSS program was established in 2002 to help achieve the District's
local and small and disadvantaged requirement established in its
procurement law and expand the District's tax base. According to a former
District executive, the DCSS program was also intended to expedite
agencies' small purchases of common and routine items for which
competition would not be practical, such as office and janitorial
supplies. The current program is the primary vehicle for supporting the
District's small, local, and disadvantaged business enterprises (LSDBE)
and requires that District entities use DCSS small business entities to
make purchases of $100,000 and below.38 This mandatory use of the DCSS
ultimately limits the pool of vendors for a number of goods and services,
which for some of the schedules is fewer than three vendors. Though it may
appear similar to GSA's MAS program of federal supply schedule contracts,
the DCSS serves a different purpose. Under the FAR, the purpose of the GSA
supply schedules program is to provide federal agencies with a simplified
process for obtaining commercial supplies and services at prices
associated with volume buying. The FAR provides extensive guidance on the
use of the schedules to achieve that purpose. In contrast, the DCSS is
designed to promote LSDBEs and lacks the type of comprehensive guidance
provided to the federal supply schedules by the FAR.

According to NASPO, unlimited use of supply schedules limits competition
and can increase costs because vendors have no incentive to meet the best
price of their competitors. Further, open-ended contracts for the same
goods or services are awarded to many more vendors than needs appear to
demand, removing any consideration of need and price from the purchasing
decision. In fiscal year 2006, reported contract awards off of the
DCSS--which contains 19 categories of goods and services with nearly 200
local vendors--totaled almost $22 million (see table 4).

38 To be eligible for the DCSS program, a vendor must first be certified
as a LSDBE by the Department of Small and Local Business Development. To
be eligible for an award on the DCSS, a contractor must adopt a federal
contract schedule for services or products consistent with the scope of
the DCSS application. This can be the vendor's own GSA MAS contract or
another vendor's federal MAS contract. As discussed earlier, our previous
work found that GSA does not always effectively negotiate MAS contract
pricing and the federal government is missing opportunities to save
millions of procurement dollars. By linking DCSS contract pricing to MAS
pricing, the District may be similarly missing significant cost-saving
opportunities.

Table 4: DCSS Program Schedule Categories and Number of LSDBE Vendors (as
of October 27, 2006)

Dollars in thousands                                                       
                                    Number ofLSDBE Contract      Total fiscal 
Schedule category                       vendors ceilings year2006 purchase 
Information Technology Services              40  $10,000            $5,332 
Mission Oriented Business                    40   10,000             1,502 
Integrated Services                                                        
Temporary Support Services                   22    5,000             5,696 
Information Technology Products               2    5,000                52 
Furniture and Furniture                       7    2,000             1,563 
Management Services                                                        
Office Supplies, General                     10    2,000             3,078 
Industrial Services                           6      900             1,575 
Industrial Supplies and Apparel               7      900               489 
Security Equipment and Services               9      850               513 
Audit and Financial Management                7      500               171 
Services                                                                   
Marketing and Media Services                 14      500               506 
Medical Equipment and Supplies                5      500               568 
Moving and Logistics Services                 5      500               356 
Training Services                             8      500                50 
Advertising Services and Novelty              3      400               203 
Supplies                                                                   
Engineering and Logistics                     6      250                 6 
Services                                                                   
Food Services and Equipment                   1      250                39 
Printing and Document Management              2      250                53 
Services                                                                   
Laboratory and Analysis Services              0      250                 0 
Total                                       194                   $21,752a 

Source: Office of Contracting and Procurement.

aAccording to senior procurement officials, the discrepancy between the
almost $21.8 million in reported purchases (i.e., expenditures) with DCSS
vendors and the almost $30.9 million in orders awarded to DCSS vendors in
fiscal year 2006 is due to separate contracting and procurement data
systems being used to track these different types of transactions.

Some DCSS contracts are valued much higher than $100,000, including some
fiscal year 2006 awards to DCSS vendors valued at $1 million and one award
for $5 million. Moreover, in 2006, the CPO's office raised the contract
ceilings for individual DCSS vendors on several of these schedules
including the information technology services schedule, which is now set
at $10 million. As a result, one DCSS information technology vendor could
in 1 year potentially receive a single limited competition order worth up
to $10 million. NASPO officials we spoke with voiced concern about the
ease with which the District makes what they would consider large limited
competition purchases off a supply schedule originally intended to limit
competition only for small purchases.

In addition, District procurement officials told us that the DCSS program
has limited guidance and no procedure in place to ensure that each vendor
is provided a fair opportunity to be considered for orders. Under DCSS
terms and conditions, contracting officers must follow small purchase
procedures as described in table 3 when buying a good or service off DCSS.
However, these officials said that it is up to the contracting officer to
arbitrarily select three vendors from each schedule to obtain price
quotes; according to District procurement officials, this typically
includes the incumbent. For the 14 schedules that have more than three
vendors, this discretion could prove unfair to certain vendors. The FAR,
in contrast, advises contracting officers to request quotations or offers
from two sources not included in the previous solicitation. According to
District procurement officials, there is currently no requirement to
monitor the use of the schedule to determine whether it is promoting small
businesses overall or if a pattern of sole-source contracts to the same
businesses is occurring. They told us this type of information would be
beneficial to evaluating the effectiveness of the program and that an
overall assessment of the current program may be needed to determine if it
is meeting its original intent.

The District's Law Allows Payments for Unauthorized Commitments to Vendors

To safeguard the obligation of taxpayer dollars and protect the integrity
of a public procurement system, a government's procurement law should
grant exclusive authority to contracting officers for establishing
contracts and restrict employees from making unauthorized commitments for
goods and services. It should also grant the CPO the authority to ratify
contracts and authorize payments for goods and services received without a
valid written contract if certain conditions are met. Until recently, the
District's procurement law appeared to emphasize these standards. Under
September 1996 CFO guidance, direct voucher payments without having been
first obligated in the District's financial management system could only
be made in 21 specific non-procurement related circumstances--all of which
were reasonable and included situations where the payees could not be
determined in advance, such as court ordered fines, workers' compensation,
jury duty fees, and medical payments for assault crime victims. However,
in 2006, the council, with the Mayor's approval, amended the procurement
law that increased the circumstances under which such payments may be
made.39

Changing the policy may have had the unintended consequence of focusing
agency personnel attention on the process of paying for unauthorized
commitments rather than focusing on how to get management attention on
preventing employees from entering into authorized commitments. According
to financial management officials, in 2005, the District's CFO office
reviewed over 21,000 direct voucher payments totaling $556 million made in
fiscal year 2004.40 They stated that the purpose of the review was in part
to determine to what extent these direct voucher payments resulted from
unauthorized commitments by District agencies for goods and services. The
analysis confirmed that of the vouchers reviewed, over 11,000 totaling
$217 million were not in compliance with 21 allowed uses under the 1996
CFO policy. Rather than take steps to hold agencies accountable for these
violations, the CFO's policy was changed without consulting the CPO's
office on the merits of the change. CFO officials told us their office
determined it was necessary to accommodate agency circumstances for
bypassing the procurement process to more promptly obtain goods and
services needed for critical operations.

Under Financial Management and Control Order No. 05-002, issued July 22,
2005, and revised October 17, 2005, the CFO added 7 new circumstances for
direct voucher payments to the 21 already included in the 1996 financial
guidance. Five of the seven added circumstances were for new
non-procurement related transactions, such as temporary welfare payments
to families and certain lawsuit settlement payments. The remaining two are
for procurement-related transactions, however, and are problematic. The
first circumstance--which allows direct voucher payments for goods and
services needed for an unanticipated and nonrecurring extraordinary
emergency--duplicates provisions in the District's procurement law that
establish procedures for handling such circumstances under emergency
contracting procedures. A senior District procurement official said that
direct voucher payments should not be made for emergency procurements. The
second circumstance allows agencies to make direct voucher payments for
liabilities incurred through unauthorized commitments to vendors for goods
and services without valid contracts after payment has been ratified--a
practice that could further encourage employees to bypass established
contracting procedures.41

39 The Procurement Practices Timely Competition Assurance and Direct
Voucher Prohibition Amendment Act of 2006. D.C. Law 16-122.

40 CFO staff told us the internal review was in response to a Washington
Post report alleging that District agencies made $446 million in direct
voucher payments in 2004 to vendors for such unacceptable uses as
computers and furniture.

The District's inspector general has voiced a similar concern with this
change and in December 2005 testimony called for a reexamination of the
CFO's 2005 policy for allowing direct voucher payments for unauthorized
vendor commitments that bypass contracting rules. More recently, the
inspector general reported that in fiscal year 2005, District agencies
greatly increased payment ratification requests for unauthorized vendor
commitments and the procurement office ratified $34 million in payments.42

In the federal procurement system under FAR Part 1.6, the policy provides
procedures for ratification actions to approve unauthorized commitments,
but also states that these procedures may not be used in a manner that
encourages such commitments be made by government personnel. Moreover, the
FAR provides a ratification procedure that not only discourages
unauthorized commitments, but allows for their approval if certain
conditions are met. Specifically, under the FAR, the chief of a
contracting office may ratify an unauthorized commitment only when the
goods or services have been accepted; the ratifying official has the
authority; the contract would have been proper if done by approved
personnel; the price is reasonable; the contracting officer recommends
payment; the funds were and are available; and the ratification complies
with any additional agency regulations. In addition, the FAR states that
cases of nonratifiable commitments may be subject to further referral and
resolution under government claim procedures.

41 Under District law, in order to pay vendors that have provided goods or
services without a valid contract, agency directors must seek approval for
unauthorized commitments by submitting a payment ratification request to
the Office of Contracting and Procurement. In August 2006, this office
established written procedures under Directive 1800.04 for the
ratification of unauthorized commitments.

42 Office of the Inspector General, Government of the District of
Columbia, Office of Contracting and Procurement Part One: Report of
Inspection, OIG No. 06-0017-PO (Washington, D.C.: Aug. 23, 2006). Of this
amount, $33 million was to ratify payments for OCTO's unauthorized vendor
commitments. Further, the inspector general stated that District employees
are not consistently held accountable for unauthorized commitments. In
another report, a senior official at the Department of Health, who did not
have contracting authority, bypassed the normal procurement process by
preparing and signing a letter authorizing a vendor to provide
transportation services to medical appointments for Medicaid recipients.
The contractor billed the department $936,000 for these services and,
after ratification was complete, received a direct voucher payment.
(Office of the Inspector General, Government of the District of Columbia,
Audit of Contractual Arrangement for Non-Emergency Transportation of
Medicaid Recipients, OIG No. 05-2-18HC(a)(Washington, D.C.: May 5, 2006).

Allowing government agency personnel to circumvent the normal procurement
process and enter into unauthorized commitments with vendors to perform
services or deliver goods eliminates the opportunity for competition.
After reviewing a draft of this report, CFO officials acknowledged the
need to work with the Office of Contracting and Procurement to strengthen
the District's ratification policy. They indicated that unauthorized
commitments that cannot be ratified should be referred for possible
Anti-Deficiency Act violations.43 Accordingly, we revised our
recommendations to the mayor and the CFO concerning the use of direct
vouchers and the ratification process.

Other cities we reviewed have taken steps to curb the use of unauthorized
commitments. For example, New York's CPO described the city's stringent
controls and regular monitoring to detect and publicize agencies'
unauthorized commitments with vendors as well as its discipline of
employees for bypassing contracting rules--steps that have greatly
decreased the number of unauthorized commitments in that city's
procurement system.44

43 Under the Anti-Deficiency Act, District government officers as well as
federal officials are prohibited from making obligations or expenditures
in excess of amounts available in an appropriation or fund unless they are
otherwise authorized to do so by law.

44 In Atlanta, direct vouchers or "confirmation purchase orders" are only
used when there is a dire need such as a threat to safety, welfare, or the
financial security of the city and the procurement process would not
apply. According to the CPO, they are reviewed very closely and often not
approved. Similarly, the Baltimore CPO said that city has taken steps to
curb the use of these type payments for goods and services valued at over
$1,000.

The District's Procurement System Does Not Reflect Sound Management and
Oversight Practices

In addition to generally lacking a uniform procurement law that applies to
all entities, promotes competition, and provides the CPO the authority to
ensure sound procurement outcomes, the District's management and oversight
of its procurements have lacked the rigor needed to protect against fraud,
waste, and abuse. Specifically, the Office of Contracting and Procurement
is positioned too low within the District's executive governmental
structure to enforce agency compliance with policies and procedures,
effectively coordinate procurement activities and acquisition planning,
and sustain leadership. At the same time, the District's contracting
managers and staff, agency heads and program personnel, and other key
procurement stakeholders do not have the basic tools for ensuring sound
acquisition outcomes, including written guidance on the District's
procurement policies and procedures, a professional development program
and certification requirements for contracting staff, and an integrated
procurement data system. Although the District and Congress have taken
actions to address management and oversight challenges, many remain
largely unaddressed.

Low-Level Position of the Office of Contracting and Procurement Undermines
Management and Oversight

The low-level placement of the Office of Contracting and Procurement
undermines the office's ability to effectively manage and oversee the
District's procurements across dozens of agencies and departments. NASPO
and GAO have stated that the central procurement office's effectiveness is
clearly linked to its location in the government structure and that
placing the office at a high level is critical to ensuring effective
direction, coordination, and control over a government's procurement
spending. Procurement is viewed as a strategic, service function within
the executive branch with the central procurement authority being a key
policy and management resource for the chief executive. The low-level
placement of the District's procurement office has led to high CPO
turnover and a lack of sustained leadership, significantly impeding
progress expected from the 1996 law.

Within the District's government structure, the Office of Contracting and
Procurement is placed under the Deputy Mayor for Operations--essentially
relegating procurement to an administrative and operations support
function--as further evidenced by its position in relation to those
agencies that procure through this office (see fig. 1).

Figure 1: The Office of Contracting and Procurement Placement in the
District of Columbia's Government Structure

aEntities that procure their goods and services independently of the
Office of Contracting and Procurement.

According to former CPOs and current procurement officials, the low-level
position denies the CPO direct access to the city administrator, agency
heads, and deputy Mayors other than the Deputy Mayor of Operations. As a
result, this limits the CPO's ability to affect budget, program, and
financial management decisions. A former District official told us that to
improve management and oversight of the procurement system, the CPO needs
to be at all executive meetings to raise procurement issues that cut
across agency lines. This official told us that it would be helpful to
elevate the CPO's office to a high level similar to other centralized
cross-government functions, such as the Office of the Chief Technology
Officer, which is responsible for all meeting all of the District's
information technology needs.

The low-level position of the CPO's office in the District's governmental
structure has also undercut the CPO's ability to influence day-to-day
procurements across the District. According to several senior District
procurement officials, agencies often bypass the procurement office and do
not consult the CPO's designated contracting officer when initiating
procurements--a practice that has led to unfavorable acquisition outcomes.
For example, the District's auditor reported in 2005 that the offices of
the Mayor and city administrator failed to involve the CPO's office and
violated contracting rules by entering into unauthorized commitments with
a vendor for international trade mission services without a valid written
contract, making the commitment invalid.45 Ultimately, the CPO's office
was left to ratify a transaction that did not conform to the procurement
law or regulations.

One impact of CPO's low-level placement is manifested in the inability of
the CPO to ensure effective acquisition planning--a critical process for
anticipating future needs, devising contracting programs to meet these
needs, and arranging for the acquisition to promote competition and use of
necessary resources.46 CPOs from the other cities we reviewed consider
acquisition planning as critical to managing the procurement system and
maximizing competition, and have put in place mechanisms and tools to
regularly address planning. In Atlanta, for example, the CPO requires his
contracting staff to meet bi-weekly with agency officials to plan for
expiring contracts and new requirements. Agencies are also required to
submit a quarterly report to the CPO detailing their procurement needs. In
New York, agencies awarding contracts must submit a draft plan detailing
anticipated procurement actions. They are also required to hold public
hearings on their plan within 20 days of its issuance and provide notice
of the hearings 10 days in advance.

45 District of Columbia Auditor, Letter Report: Sole Source Agreements
Issued by the Executive Office of the Mayor and Office of the City
Administrator Failed to Comply with Procurement Law and Regulations
(Washington, D.C.: June 3, 2005).

While the District has a process in place to facilitate acquisition
planning across agencies, the CPO lacks the ability to hold agencies
accountable for submitting accurate and timely plans. According to former
CPOs and current senior procurement officials, District entities in
general do not understand the importance of acquisition planning or
involving the CPO's office in planning efforts. Consequently, agencies
largely view the required annual plans as a paper drill. In recent years,
the CPO's office has tried to improve acquisition planning across the
procurement system without much success. For example, in 2000 the then-CPO
implemented a new acquisition planning tool that was aimed at guaranteeing
short turnaround for small and simple buys and sharing workload with
partner agencies on larger, more complex buys. Though this was the
original intent, CPO contracting officers we spoke with do not use the
plans to schedule procurement support activities for their agencies. Our
analysis of selected contracts conducted by the CPO's office in 2005 for
three agencies against procurements listed in their 2005 acquisition plans
found none of the contracts were recorded in the planning tool.

46 Requirements for federal acquisition planning are addressed in detail
in the FAR. For example, in justifying contracting without providing for
full and open competition in the federal procurement system, FAR Part
6.301 policy states that "a lack of advance planning by the requiring
activity" shall not be used. Similarly, in order to promote competition,
FAR policy requires acquisition planning for all acquisitions and the
efforts of all responsible personnel for the purpose of ensuring that the
government meets its needs in the most effective, economical, and timely
manner. NASPO's state and local government purchasing principles similarly
emphasize acquisition planning and scheduling and discuss the role of the
central procurement office--both in terms of broad, longer-term management
and in terms of day-to-day decision making on the timing of procurements
and methods of contracting at the operations level.

The District's inspector general and auditor offices have repeatedly found
that the District's lack of effective acquisition plans results in
excessive use of sole-source contracts and missed opportunities for
competition, thereby contributing to unnecessary spending from higher cost
procurements. In December 2005 testimony before the Council, the
District's auditor stated that as "a government striving for
self-government, [the District] desperately needs to improve
accountability and ethics in the way the procurement and contracting
process is carried out and to restore the faith of residents that tax
dollars are being spent judiciously, economically, and competitively. The
failure to conduct advanced planning for known projects, services, and
procurement requirements ultimately manifests in costly internally
generated emergency contracts and purchases." A senior District
procurement official agreed and stated that the lack of planning does not
constitute an emergency, but all too often the lack of planning occurs and
forces emergency-type procurement actions.

Finally, sustaining procurement leadership has been difficult due to the
low-level position of the CPO's office. Former CPOs agreed that in a
complex and large-scale procurement system such as the District's, it is
essential to have sustained leadership and a CPO with executive-level
procurement experience and qualifications. However, over the past 10
years, the District has had five CPOs--three appointed for 5-year terms
and two interim--and none served more than 3 years. According to each of
the three CPOs appointed to 5-year terms, the inability to effectively
coordinate acquisition activities across all agencies and manage and
oversee the District's procurement function undermined their efforts at
reform and ultimately discouraged them from completing their tenures. The
lack of sustained leadership is underscored by the 2-year vacancy in the
District's CPO position since September 2004, at which time the Deputy
Mayor for Operations became the interim CPO. 47 With no procurement
experience--contrary to the District's law requiring at least 7 years of
procurement experience--this official acknowledged that it has been
challenging to assume the extra responsibilities of the CPO position.

The cities we reviewed have recognized the importance of elevating the
central procurement office in the governmental structure as necessary for
sound procurement management and oversight. For example, in 2003, Atlanta
recognized that the centralized acquisition function headed by a senior
procurement director was buried in the structure and took steps to elevate
this office with a newly appointed CPO to report through its chief
operating officer to the Mayor. According to Atlanta's CPO, the office now
has a seat at the table with the necessary authority to control and direct
procurement across all agencies, and to have the Mayor reinforce the CPO's
role in managing the city's council and agencies.

47 In October 2006, we were told that this interim CPO left his deputy
Mayor position in the District government. This latest vacancy in the
District's CPO position is now being filled on an acting basis by the
commodity manager for human care supplies and services contracting.

The District Lacks Other Tools for Effective Procurement Management and
Oversight

The District lacks other basic tools to effectively manage and oversee its
procurement system. Specifically, the city lacks (1) a procurement manual
with clear standardized policies and procedures to guide procurement and
agency staff; (2) certification requirements for procurement staff and
training for agency staff so that both workforces have the necessary
skills and knowledge to fulfill their responsibilities; and (3) an
integrated procurement data system that can provide complete, accurate,
and timely information to inform acquisition decisions and management.
Other cities we reviewed recognize the benefit of having these tools as a
way to effectively manage and oversee their procurement systems.

  The District Lacks a Procurement Manual to Guide Staff

Despite repeated recommendations since 1997 to develop a procurement
policy and procedures manual, the District has yet to do so. Procurement
is a complex process guided by numerous policies, documentation
requirements, and procedures. A comprehensive manual--one that lays out in
one place these policies and rules and standardized procedures and
practices--is critical to ensuring procurement and agency staff have a
clear and consistent understanding of contracting rules and processes. An
internal study by the CPO's office in 2004 found that in the absence of
such guidance, there was a lack of consistency in how the District's
procurement work is done. This inconsistency creates frustration within
and outside the government as well as an impression that the District's
procurement actions are unfair.

Each of the other cities we reviewed have developed and implemented a
basic procurement manual for strengthening management, accountability, and
transparency in their procurement systems. In Atlanta, for example, when
the new CPO was appointed in 2003, he found a comprehensive procurement
manual was key and immediately took steps to update the manual, which had
not been done in 7 years.

  The District Lacks Professional Certifications for Procurement Staff

According to former CPOs and current senior procurement officials, the
District has not committed to developing a professional acquisition
workforce For example, the CPO's office has not fully developed
professional certification requirements. Although the CPO is not required
to develop such requirements, this would ensure staff have the
qualifications and skills to carry out the responsibilities commensurate
with their delegated contracting authorities. A former District executive
told us that the CPO's office should deliver regular training to agency
managers and staff on procurement rules and procedures as well as develop
metrics to ensure that agency staff participate in the training and obtain
the necessary knowledge for fulfilling their responsibilities in the
procurement process.

One former CPO referred to his staff as an "accidental" procurement
workforce because some had previously been administrative staff and few
had any contracting background. In 2005, the CPO's office conducted a
skills and training assessment and determined that the current procurement
and contracting staff required training on fundamental processes, such as
source selection, contract negotiation, and contract administration. The
CPO's fiscal year 2006 budget added $668,400 earmarked for procurement
training, and the interim CPO developed a program to train the District
procurement staff on basic contracting concepts. While the 2006 training
program appears to have addressed some of the immediate contracting skill
gaps identified in the 2005 assessment, this one-time effort, in our view,
does not address the CPO office's need for longer-term investments in
training. Unlike in the federal government, this program is not linked to
a certification process or continuing education necessary for maintaining
individual employee's contracting authorities.48 In the absence of a
comprehensive training and certification program, the CPO delegates
contracting authority to procurement staff based on his perceptions of
individual skill and experience.

NASPO emphasizes the importance of professional development and not only
recommends that executive branch officials and the central procurement
office encourage professional competence by providing funding for
training, but endorse professional certification of staff. Several public
procurement organizations, including the National Institute for Government
Purchasing, have developed certification programs to ensure procurement
staff has attained a prescribed level of qualification. Procurement
officials in other cities we reviewed also view training and certification
of the procurement staff as critical to the success of their procurement
system. For example, New York's CPO office established a Procurement
Training Institute in 2000 and requirements for staff training, including
certifications and continuing education minimums.

48 The Federal Acquisition Institute and Defense Acquisition University
have partnered to provide a governmentwide course curriculum and other
resources for the federal acquisition workforce. Specifically, the Federal
Acquisition Institute has developed a certification program for
contracting professionals in civilian agencies that reflects common
standards. This program closely mirrors that the requirements that the
Department of Defense has established for its contracting workforce. The
goal of the program is to standardize the education, training, and
experience requirements for contracting professionals, which is intended
to improve workforce competencies and increase career opportunities.

  The District's Integrated Procurement Data System Has Yet to Be Fully
  Implemented

The District also lacks an integrated procurement data system to centrally
manage and oversee agency and headquarters procurement activities, despite
the procurement law requiring such a system over 20 years ago49 and
investment in the Procurement Automated Support System (PASS), which was
intended to provide these capabilities. Although the CPO's office
recognizes that capturing and reporting complete, accurate, and timely
procurement data would increase transparency and support development of
meaningful performance measures to promote competition and discourage
excessive use of sole-source contracts and unauthorized vendor commitments
without valid contracts, officials have lacked the high-level support from
District leaders and OCTO needed to follow through on their plans for
improvement.

To make strategic, mission-focused acquisition decisions, organizations
need knowledge and information management processes and systems that
produce credible, reliable, and timely data about the goods and services
acquired and the methods used to acquire them. Our prior work has shown
that leading companies use procurement and financial management systems to
gather and analyze data to identify opportunities to reduce costs, improve
service levels, measure compliance and performance, and manage service
providers.50

49The District's Procurement Practices Act, as enacted, in 1986 required
within 12 months of the effective date, the establishment of a
comprehensive computer-based material management information system for
collecting, organizing, disseminating, maintaining, and reporting
procurement data that takes into account the needs of all branches of the
District government. Further, the act required the system to permit
measuring and assessing the impact of procurement activities on the
economy of the District government and the extent to which LSDBEs were
sharing in the District's contracts. Moreover, the act required the system
to (1) serve for policy and management control purposes, such as
forecasting material requirements and purchasing; (2) reflect the state of
the art in information systems technology; and (3) have the ability to
accommodate future technical enhancements.

After numerous discussions with procurement, financial management, and
auditing officials, we found there is no visibility over total procurement
actions and spending in the District. We found it difficult to get even
the data on such basics as the number and dollar value of hundreds of
millions of dollars in procurements for agencies not supported by the
CPO's office, such as the public schools and the Department of Mental
Health. Data for the $1.2 billion in fiscal year 2005 procurement spending
reported by the District's CPO office are captured by several standalone
systems. As a result, the CPO's office cannot readily generate regular
reports from these systems to track information on what agencies are
buying, how they are buying, and from whom they are buying. When we
initiated this review, we requested procurement data on such basics as the
number of sole-source contracts awarded in a specified time frame, from
the CPO's office for fiscal years 2005 and 2006. The information was
provided to us piecemeal. According to a District procurement official, to
obtain this data, the CPO's office must ask its contracting officers and
specialists to manually compile, sometimes from memory, the information--a
workaround that is not only time-consuming but at significant risk of
error. Because of this, we were unable to obtain reliable fiscal year 2006
data on sole-source awards.

In an effort to obtain complete, accurate, and timely procurement data and
to automate and streamline the procurement process, the District has
invested almost $13 million in PASS. Yet, almost 4 years since its
inception in 2003, the system is only partially in operation.51 According
to District procurement officials, PASS does not provide full information
on completed or ongoing procurements across all agencies, nor does it
provide CPO and District agency and financial managers reports and other
information they need to manage and oversee the procurement system. In
August 2006, the inspector general reported concerns over the delays in
fully implementing PASS, noting that a conflict between the CPO's office
and OCTO has hindered the installation and full implementation of PASS.52
According to senior procurement officials, the CPO's office has not
consented to the extra $2 million that OCTO is requesting to fully
implement PASS because all upgrades and installation were included in
their purchase of PASS in 2003. The inspector general has recommended the
CPO's office seek assistance from the Mayor's office in expediting the
installation and implementation of PASS's contracting and sourcing
modules.

50 GAO, Best Practices: Using Spend Analysis to Help Agencies Take a More
Strategic Approach to Procurement, [39]GAO-04-870 (Washington, D.C.: Sept.
16, 2004).

51 According to the CPO's office, PASS is a commercial procurement
software application that includes different modules. PASS supports the
District's on-line procurement process and is intended to help contracting
personnel more efficiently purchase, report, and manage procurements. PASS
is being incrementally deployed with the District having so far
implemented two of the four modules, including (1) the automated,
Web-based buying module and (2) the module that facilitates Web-based
obligation and approval for vendor payments.

CPOs in the other cities we reviewed told us that a procurement data
system is critical to managing and overseeing the procurement system, but
some are facing challenges similar to the District's to develop an
integrated tool. New York's CPO, for example, told us that the city
clearly recognizes the importance of an integrated procurement data system
and as a result, is engaged in a major undertaking to fully implement a
data system sometime in 2007. In the interim, she relies on information
contained in the city's financial management system in compiling various
procurement performance indicators.

The District's Recent Actions to Address Its Procurement Management and
Oversight Challenges Have Had Little Effect

Since 2004, the District has taken several actions to improve the
management and oversight of its procurement system. These efforts include
an internal study for innovation and reform in the CPO's office and
procurement system; changes in staff assignments and review processes in
the CPO's office; and establishment of an expert task force to review CPO,
procurement workforce, and competition matters and submit recommendations
to the Mayor and council. However, information we obtained from former
CPOs and current senior procurement and other officials involved with
these efforts indicates that most recommended actions remain under study
or are partially implemented at best. Most of these officials voiced
skepticism or concern about the merits and benefits of these efforts as
well as the absence of high-level and sustained attention from District
leaders to address systemic problems that hamper management and oversight
of the procurement system and undermine transparency, accountability, and
competition.

52 Office of the Inspector General, District of Columbia, Office of
Contracting and Procurement Part One: Report of Inspection, OIG No.
06-0017-PO (Washington, D.C.: Aug. 23, 2006).

Following the early resignation of the District's last full-time CPO in
September 2004, the Mayor and city administrator directed the District's
Center for Innovation and Reform to work with the interim CPO's staff to
lead a 6-week internal initiative to create a credible, transparent
procurement process that incorporate best practices and innovation. This
internal group's final report made several recommendations to the CPO's
office aimed at streamlining the process, providing tools such as a
procurement manual, and leveraging technology.53 However, 2 years after
these recommendations were made, many remained open. Further, none are
aimed at the type of legal and organizational changes necessary for
effective reform.

More recently, the interim CPO took steps to provide better customer
support from the Office of Contracting and Procurement to the District's
agencies and vendors. Specifically, the interim CPO announced in April
2006 the establishment of sole-source contract reviews and implementation
of a central tracking data system to ensure that contract ceilings are not
exceeded, and to capture vendor performance data for consideration in
future source selections affecting those vendors. The CPO also announced a
new staffing alignment to assign a lead contracting officer for groups of
agencies and several commodity buying groups for certain services that are
centrally managed, such as construction and information technology
equipment and services. According to senior procurement officials and the
interim CPO, they expect that assigning contracting officers will improve
communication and efficiency across the District as agencies will have a
single point of contact for managing and troubleshooting contracting
issues. While these are positive steps aimed at improving internal
procurement operations, they are not far reaching enough to address the
more fundamental problems impeding overall effectiveness in the District's
procurement system.

The third effort to improve District procurement has been ongoing since
December 2005 when the Mayor and council passed legislation to establish a
task force of local experts in contracting and procurement.54 The task
force is comprised of 10 members appointed by the Mayor and council and
represents a range of professional, legal, and business expertise in
District and public procurement operations and policy. Since March 2006,
the task force has met to obtain testimony and review other information
from District procurement, financial management, auditors, and agency
officials. At the time of our review, the task force chairman expected to
report final recommendations to the Mayor and council before the end of
2006.

53 Center for Innovation and Reform, Executive Office of the Mayor,
Contracting and Procurement Continuous Improvement Initiative:
Recommendations for Reform (Washington, D.C.: Sept. 30, 2004).

54 Contracting and Procurement Reform Task Force Establishment Emergency
Act of 2005 and the Contracting Reform Task Force Establishment Temporary
Act of 2006.

In addition to these actions the District has taken to address procurement
system challenges, in December 2005, the Mayor, interim CPO, and CFO
separately provided information to the Chairman of the House Government
Reform Committee, who requested the information in light of press
allegations about possible violations of the city's procurement laws and
procedures, and unauthorized payments to vendors. The Chairman noted that
it was essential for the Committee to conduct an assessment of the
District's procurement system and the possible shortcomings in the laws,
policies, enforcement and practices. In their separate responses, the
Mayor, interim CPO, and CFO provided copies of the law, policies, and
procedures in place in the District for procurement and contracting,
including sole source and small purchase actions, exemptions for various
agencies such as the public schools and Department of Mental Health,
approval of voucher payments to vendors, and procurement and contracting
oversight mechanisms through the District's inspector general and
auditor's offices. In addition, the interim CPO provided information on
recent actions taken by the Office of Contracting and Procurement to
improve customer service and streamline the procurement process. However,
information provided did not address the range of concerns and shortfalls
in the procurement law and management and oversight that we subsequently
identified during the course of our review.

NASPO state government and city procurement officials we spoke with said
they have confronted similar management and oversight challenges. They
recognized that overcoming these challenges and achieving meaningful
procurement reform can take several years and requires sustained executive
support from elected leaders and legislatures.

Conclusion

To better ensure every dollar of the District's more than $1.8 billion
procurement investment is well spent, it is critical that the District
have an effective procurement system that follows generally accepted key
principles and is grounded in a law that promotes transparency,
accountability, and competition, and helps to ensure effective management
and oversight and sustained leadership. Currently, the District's
procurement system is mired in a culture that thrives on streamlined
acquisition processes, broad authority for sole-source contracts, and
unauthorized payments to vendors that are eventually papered over through
ratifications. Given this culture, it is not surprising that public
confidence in the District's ability to judiciously spend taxpayer dollars
is guarded at best. To effectively address the District's long-standing
procurement deficiencies, it is clear that high-level attention and
commitment from multiple stakeholders--including Congress--are needed.
Until the law provides for the right structure and authority, the
District's procurement reforms will likely continue to fail.

Recommendations for Executive Action

To address needed structural and fundamental revision in the District's
procurement law and to strengthen management and oversight practices as
well as facilitate congressional oversight, we recommend that the Mayor of
the District of Columbia submit a comprehensive plan and time frame to
Congress detailing proposed changes in line with our recommendations. This
comprehensive plan, to be submitted to Congress, should include the
following recommendations for revising the procurement law:

           o Apply, at a minimum, to all District entities funded through the
           District's appropriated budget and specify that if exclusions from
           its authority are necessary, they be defined narrowly by types of
           goods and services procured.

           o Provide the CPO sole authority and responsibility as head of the
           District's Office of Contracting and Procurement to manage and
           oversee the entire acquisition function for all entities, and if
           exclusions from the CPO's authority are necessary, they be defined
           narrowly by types of goods and services procured.

           o Consider reestablishing the CPO as the sole authority for
           suspension and debarment decisions.

           o Eliminate sections 2-303.05(a)(3) and (a)(3A) of the District
           Official Code that allow noncompetitive procurements with a vendor
           who (a) maintains a price agreement or schedule with any federal
           agency; and (b) agrees to adopt the same pricing schedule as that
           of another vendor who maintains a price agreement or schedule with
           any federal agency.

           o Reconsider appropriateness of high dollar thresholds for small
           purchases to maximize competition.
           o Revise the DCSS program to (a) cap purchase ceilings at an
           appropriate threshold; (b) eliminate any schedule that contains
           fewer than three vendors or combine it with another schedule; (c)
           establish procedures to ensure all eligible vendors are provided
           an opportunity to be considered for orders; and (d) require the
           CPO to monitor and report on patterns of contracting with a
           limited number of the same vendors.

           o Require that specific guidance on the use of the DCSS program be
           incorporated into the District's regulations.

           o Eliminate the procurement-related circumstance that allows
           direct voucher payments for emergency procurements.

To further discourage the use of unauthorized commitments to vendors, we
recommend that the Mayor of the District of Columbia, in coordination with
the CFO and other stakeholders take the following actions:

           o Revise Directive 1800.04 to be consistent with FAR part 1.6 and
           clearly state, consistent with the policy of FAR section
           1.602-3(b), that these ratification procedures are not to be used
           in a manner that encourage unauthorized commitments by government
           personnel.

           o Refer unauthorized commitments that are not ratified for further
           resolution under government claim procedures, to include in
           appropriate cases, possible referrals for Anti-Deficiency Act
           violations.

           o Upon revision of the ratification directive, track and evaluate
           the use of direct voucher payments and ratifications to improve
           management attention and oversight of agencies' unauthorized
           commitments with vendors.

To strengthen management and oversight practices in the District's
procurement system, we recommend that the Mayor take the following
actions:

           o Recruit and appoint a CPO with the requisite skills and
           procurement experience as required in the law.

           o Elevate the CPO's position and office so that it is either in
           line with other critical cross-government functions, such as OCTO,
           or higher and would allow participation in cross-cutting executive
           management, budgeting, planning, and review processes.
           o Direct the CPO to develop a process and tools for frequent and
           regular interactions with agency heads and program managers to
           support acquisition planning.

           o Direct the CPO to develop a procurement manual concurrent with
           revision in the procurement law.

           o Direct the CPO to establish a plan and schedule for professional
           development and certification programs for contracting staff and
           to track personnel trained.

           o Direct OCTO to work with the CPO to expeditiously complete
           installation of an integrated procurement data system.

To help ensure the District makes adequate progress in revising its
procurement law and improving procurement management and oversight, we
recommend that the Mayor submit periodic reports to congressional
oversight and appropriations committees on such elements by agency as (a)
competitive actions by agency; (b) number, value, and type of sole source
procurements; (c) numbers of procurement personnel trained and the type of
training received; and other indicators as appropriate.

In addition, to further discourage the use of unauthorized commitments to
vendors, we recommend that the Chief Financial Officer (CFO) of the
District of Columbia take the following actions:

           o Revise Financial Management and Control Order No. 05-002 to
           eliminate the use of direct vouchers payments for emergency
           procurements.

           o Work with the CPO and other stakeholders to do the following:

           (a) Revise Directive 1800.04 to be consistent with FAR part 1.6
           and clearly state, consistent with the policy of FAR section
           1.602-3(b), that these ratification procedures are not to be used
           in a manner that encourage unauthorized commitments by government
           personnel.

           (b) Refer unauthorized commitments that are not ratified for
           further resolution under government claim procedures, to include
           in appropriate cases, possible referrals for Anti-Deficiency Act
           violations.

           (c) Upon revision of the ratification directive, track and
           evaluate the use of direct voucher payments and ratifications to
           improve management attention and oversight of agencies'
           unauthorized commitments with vendors.

Agency Comments and Our Evaluation

We provided a draft of our report to the former Mayor's office and the
office of the CFO. The primary focus of our report deals with procurement
reform needed in the District that falls under the responsibility of the
Mayor. Therefore, most of our recommendations are made to the Mayor's
office. Given that the comment period coincided with the final month of
the administration, the outgoing Mayor chose not to comment. However, the
new administration contacted our office and indicated concurrence with
most of the findings and recommendations and, as the principal office
responsible for ensuring action is taken, plans to provide formal comments
and an action plan within 60 days of the report's public release.

Though most of our recommendations are made to the Mayor's office, there
is a role for the CFO to play in helping curb unauthorized commitments.
Therefore, we also made recommendations to the CFO. In that context, the
CFO provided written comments, which were limited to our discussion on the
use of direct vouchers. Our response focuses only on those comments.

In general, the CFO questions our understanding of the direct voucher
process and the CFO's authority. We recognize the limitations in the CFO's
authority for holding personnel accountable for unauthorized commitments
and the CFO's obligation to pay for accepted goods and services. However,
focusing on limited authority and payment obligation does not address the
larger issue. Specifically, our report raises a concern about the effect
of the lack of management attention on prohibiting unauthorized
commitments that may be ratified and ultimately paid through direct
vouchers--a process CFO staff acknowledge is broken and in need of more
stringent controls. Accordingly, we revised our recommendations to the
Mayor and the CFO concerning the use of direct vouchers and the
ratification process. Strengthening this process is a small part of a
larger procurement reform effort that must be headed by the Mayor and
implemented by the CPO, CFO, and other stakeholders in the District. The
CFO's comments state that the office intends to review and clarify
Financial Management and Control Order No. 05-002. We encourage them to
implement our recommendations as well as work with the Mayor's office and
other stakeholders in coordinating procurement reform actions as
applicable.

The CFO's comments are included in appendix III along with our comments on
specific points he raised.

As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days
from the date of this report. We will then send copies to other interested
congressional committees and the Mayor and Chief Financial Officer of the
District of Columbia. We will make copies available at no charge on GAO's
Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-4841 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on the
last page of this report. See appendix IV for a list of key contributors
to this report.

Sincerely yours,

Ann Calvaresi Barr
Director, Acquisition and Sourcing Management

Appendix I: Scope and Methodology

We conducted our work at the District of Columbia's Office of Contracting
and Procurement, Office of the CFO, Office of the Inspector General,
Auditor's Office, and Center for Innovation and Reform. We did not conduct
detailed audit work at the various agencies that procure independently of
the Office of Contracting and Procurement since this is the central office
that was established under 1996 reform legislation and it procures for 61
District organizations--a majority in the District. We also visited
representatives of the National Association of State Procurement Officials
(NASPO) in Springfield, Illinois, and city procurement officials in
Atlanta, Baltimore, and New York. In selecting cities to visit, we
considered those that have faced similar challenges to the District as
well as took various approaches to structuring their public procurement
systems and implementing reform. We did not assess the effectiveness of
their approaches or reform efforts and our report is not intended to
suggest that we evaluated or endorse any particular approach from these
cities, but only to draw comparisons to the District where applicable.

In developing our criteria for generally accepted key principles for an
effective public procurement system, we relied on a variety of sources.
NASPO is a nationally recognized non-profit association comprised of
directors of central purchasing offices in each of the 50 states and other
member jurisdictions. NASPO has published a series of volumes related to
state and local government purchasing with the most recent edition
describing principles and suggested practices.1 We also spoke with state
procurement officials representing NASPO to obtain their perspectives on
our analysis as well as their own states' guiding principles and practices
for an effective public procurement system. In addition to NASPO, the
American Bar Association's (ABA) model procurement code for state and
local governments outlines principles for public procurement and provides
a variety of options and strategies applicable to all public bodies.2 The
Federal Acquisition Regulation (FAR) also describes guiding principles of
public procurement and though these are aimed at the federal government,
many are not unique to the federal acquisition system and are equally
applicable to state and local governments. Finally, we leveraged our own
work since 2001 on effective procurement and acquisition management
practices.3

1 NASPO, State & Local Government Purchasing: Principles & Practices,
Fifth Edition (Lexington, Ky.: 2003).

2 ABA, Model Procurement Code for State and Local Governments, adopted in
1979 and updated in 2000.

To assess whether the District's primary procurement law reflects
fundamental principles that promote transparency, accountability,
integrity, and competition, we did a detailed legal review and analysis of
the Procurement Practices Act of 1985, as amended. We did not do a similar
review or analysis of laws, policies, or regulations governing the various
independent agencies or procurement authorities. In comparing the
District's primary procurement law to generally accepted key principles
and assessing the impact of any shortfalls, we focused on several key
elements that are recognized by a variety of sources for promoting
transparency, accountability, integrity, and competition: (1) uniform
application of the law across all District organizations; (2) adequacy of
authority granted to the CPO for the full spectrum of acquisition
functions; (3) exemptions in the law through various temporary, emergency,
or permanent legislative amendments; and (4) provisions in the law that
limit or restrict competition, such as authority for sole-source
contracting, simplified acquisition procedures, and use of supply
schedule. Our review also examined recent legislation that was passed in
response to various procurement challenges that had been identified to
include changes in law and policy resulting from the CFO's review of
direct voucher payments for unauthorized commitments with vendors for
goods and services without valid contracts.

To further understand the rationale and impact of these various provisions
and related procurement issues, we interviewed current and former
procurement, executive, financial management, and auditing officials in
the District. We also spoke to a D.C. Council committee representative
regarding legislative actions to address reported procurement problems and
related issues. In addition, we interviewed state government procurement
leaders of NASPO about sound principles and practices regarding public
procurement statutory coverage and their views on issues we raised about
the District's procurement law. We also interviewed city procurement
officials in Atlanta, Baltimore, and New York to obtain their views on
issues we raised concerning the District's procurement law and to learn
about related challenges they have faced and their responses to these
challenges.

3 GAO, District of Columbia: D.C. Public Schools Inappropriately Used Gas
Utility Contract for Renovations, [40]GAO-01-963 (Washington, D.C.: Sept.
28, 2001); Best Practices: Taking a Strategic Approach Could Improve DOD's
Acquisition of Services, [41]GAO-02-230 (Washington, D.C.: Jan. 18, 2002);
Metropolitan Washington Airports Authority: Contracting Practices Do Not
Always Comply with Airport Lease Requirements, [42]GAO-02-36 (Washington,
D.C.: Mar. 1, 2002); Transportation Security Administration: High-Level
Attention Needed to Strengthen Acquisition Function, [43]GAO-04-544
(Washington, D.C.: May 28, 2004); Homeland Security: Successes and
Challenges in DHS's Efforts to Create an Effective Acquisition
Organization, [44]GAO-05-179 (Washington, D.C.: Mar. 29, 2005); and United
Nations: Procurement Internal Controls Are Weak, [45]GAO-06-577
(Washington, D.C.: Apr. 25, 2006).

To assess the extent to which the District's management and oversight of
the procurement process reflect generally accepted practices, we examined
several key elements. First, we examined the organizational alignment and
leadership for managing the acquisition function across all District
organizations. Second, we assessed management's commitment to competence
including elements required for a professional procurement workforce.
Third, we reviewed the District's development of procurement management
and oversight tools, including a procurement manual and automated data
systems for recording procurement information. To gain insights on the
challenges of procurement management and oversight in the District, we
interviewed current and former city procurement and District executive
officials to obtain their perspectives. To obtain an historical
perspective on the management and oversight challenges in the District
that drove legislation reform in 1996, we reviewed various studies done at
that time and their recommendations. To understand how the District has
addressed those challenges, we reviewed selected District inspector
general and auditor reports since 2004, and the resulting recommendations
as well as those from the internal study of the Center for Innovation and
Reform. We interviewed responsible city procurement officials on the
status of addressing those recommendations. We also interviewed the
chairman of the Contracting and Procurement Reform Task Force, which was
established in 2006 to review the District's procurement system and
attended several public meetings to observe their discussions.

In the course of our review, we relied on various management and other
procurement data reports provided by the Office of Contracting and
Procurement. Specifically, information on procurement spending in dollars
and contracting and competition methods was generated from various
procurement data systems or compiled from manual inputs. Though we did not
conduct detailed tests of procurement transactions, data reliability was
suspect for these various reports based on very limited testing and
independent auditors have also raised questions about the data. To fully
test data reliability for all the various reports we received would have
required resources outside the scope of this review. Moreover, an
independent public accounting firm audits the District's financial
statements annually and reports on internal control and compliance over
financial reporting. Compliance with procurement regulations was part of
the fiscal year 2005 audit in which the District received an unqualified,
clean opinion. Despite the limitations, we found the data to be reasonable
and sufficiently reliable for our purposes. Further, we have attributed,
where applicable and appropriate, this information to the Office of
Contracting and Procurement and responsible officials.

This work was done between February 2006 and October 2006 in accordance
with generally accepted government auditing standards.

Appendix II: District Governance and Related Procurement Authorities

Home Rule Act

In 1973, Congress enacted the District of Columbia Self-Government and
Governmental Reorganization Act or Home Rule Act,1 which set forth the
structural framework of the current District government in the District
Charter. The District Charter established the Office of the Mayor and
vested the Mayor with the executive power. It also established the D.C.
Council and delegated certain legislative powers to it.2 Despite the
powers delegated to the Council, Congress retained the ultimate
legislative authority over the District under the Constitution.3
Generally, the Constitution authorizes Congress to enact legislation on
any topic for the District and to amend or repeal any District act.

With regard to the powers delegated to the Council, the Home Rule Act
authorized it to pass permanent and emergency acts. A permanent act starts
as a bill, which usually gets introduced by a Council member and then gets
assigned to and considered by the proper committee. The committee then
reports the bill to the Committee of the Whole (the entire Council), which
reviews it before it is put on agenda for regular session. Hearings are
required for permanent legislation before it is adopted.4 The Council
votes on a bill two times, during first and second readings. However, 15
days before the Council adopts a bill, it must be published in the D.C.
Register.5 The Mayor then can either (1) sign the bill or take no action
and it becomes an act or (2) veto the bill and Council can override the
veto by two-thirds majority. The act must then be published in the D.C.
Register. The Council chair transmits the act to both houses of Congress,
which have 30 calendar days (or 60 calendar days for criminal acts) to
review the act and if they take no action, the act becomes law. 6 Congress
may disapprove the act by adopting a joint resolution of disapproval,
which must be signed by the President. Unless the President vetoes the
act, it becomes law within 30 days.

1 Pub. L. No. 93-198 (1973). The federal Act was supplemented by D.C.
Council Rules, which provide rules of organization and procedure for the
Council. It should be noted that a Council enactment is cited as an "act"
but a congressional enactment is cited as an "Act."

2 The D.C. Council has 13 members who are elected for 4-year terms.

3 U.S. Const., art. I, S 8, cl. 17.

4 Council Rule, Art. IV, S 305. Hearings require public notice and may be
given by publication in the D.C. Register, in newspapers, mailing notices
to a mailing list maintained by the Secretary, and by other means. Council
Rule, Article IV, S 425.

5 Council Rule, Art. IV, S 422.

6 The 30-day period excludes Saturdays, Sundays, and holidays, and any day
on which either House of Congress is not in session. Thus, if one or both
of the Houses are out of session, a day cannot be counted within that
time. Home Rule Act, section 602 (c)(1). Also, Congress usually adjourns
in October. As a result, any act passed by the Council after July usually
will not become law until the following year.

Emergency acts are quicker to pass than permanent acts, since they are not
required to go through (1) committee, (2) a second reading, (3) a public
hearing, (3) congressional approval, and (4) publication in the D.C.
Register before becoming effective, but must be published after that. 7
For an emergency act, the Council must decide by two-thirds of the members
that emergency circumstances make it necessary that an act be passed. 8
Emergency acts are effective for 90 days.

With regard to the executive power, the Home Rule Act vested in the Mayor,
who is the chief executive officer of the District government, the power
to properly execute all laws relating to the District. The Mayor may
delegate any function to (1) any officer, employee, or agency of the
executive office of the Mayor or (2) any director of an executive
department who may, with the Mayor's approval, further delegate all or
part of the functions to subordinates under the Mayor's jurisdiction. 9

In addition to establishing these branches of government in the District,
the Home Rule Act also established five independent agencies existing
outside the control of the executive or legislative branches of the
District government. The independent agencies were the (1) Board of
Education; (2) Armory Board; (3) Public Service Commission; (4) Zoning
Commission; and (5) Board of Elections.

7 The legislative history of the Home Rule Act does not provide insight
about what Congress intended regarding the frequency or circumstances in
which the Council should use the emergency act provision. If the Council
finds the existence of an emergency and approves an emergency bill, the
Council may, at the same legislative session, consider a temporary bill on
first reading without committee referral; the temporary bill must be
"substantially similar" to the emergency bill and may remain effective for
not more than 225 days. Temporary legislation is passed with an emergency
legislation to ensure that some legislation is in effect while permanent
legislation is before Congress and to fill the gap between the expiration
of an emergency act and the effective date of a permanent act.

8 Current Council rules clarify that an "emergency" means a situation that
adversely affects the health, safety, welfare, or economic well-being of a
person for which legislative relief is deemed appropriate and necessary by
the Council, and for which adherence to the ordinary legislative process
would result in delay that would adversely affect the person whom the
legislation is intended to protect. It also clarifies that legislation
must take effect, according to its terms, either immediately or at a
specific time. Council Rule, Art. IV, S 412(b)(c).

9 The Mayor cannot, however, delegate the authority of approving or
disapproving acts passed by the Council. Home Rule Act, S 422(6).

Procurement Practices Act of 1985

In 1986, the Council enacted the D.C. Procurement Practices Act of 1985,10
pursuant to the Council's authority to pass acts under the Home Rule
Act.11 One of the primary underlying statutory policies of the act was to
provide for a uniform procurement law and procedures for the District of
Columbia government. To achieve this policy, the Procurement Practices Act
applied to all agencies and employees of District government which were
subordinate to the Mayor.12 The Procurement Practices Act excluded from
its application a separate branch of government or an independent agency
(as defined in D.C. Administrative Procedures Act) that had authority to
enter into contracts or to issue rules and regulations for awarding
contracts pursuant to existing law.13 The Procurement Practices Act
applied to every contract, interagency agreement, or intergovernmental
agreement for procurement or disposal of goods and services by covered
agencies and employees.

The Procurement Practices Act also created in the executive branch of the
District government the Contract Appeals Board. The appeals board was the
exclusive hearing tribunal for and had jurisdiction to review and
determine de novo throughout the District government the following: (1)
protests of a solicitation or contract award and (2) appeals from a final
decision of the Director of Administrative Services. It allowed
disappointed contractors to appeal board decisions to the D.C. Court of
Appeals. It also established bid protest procedures for protests of the
solicitation or award of a contract.

10 D.C. Law 6-85 (1986), codified at the D.C. Official Code, S 2-301 et
seq.

11 Home Rule Act, S 412(a). The Procurement Practices Act provided that
nothing in the act or in its implementing regulations abrogates the powers
and duties of the Mayor pursuant to the Home Rule Act or any other law not
specifically repealed by the Procurement Practices Act. D.C. Law 6-85, S
201(b) (1).

12 Although the Procurement Practices Act did not define the term
"subordinate agency," it defined the term "agency" as used in the act to
exclude an independent agency from its application, so we know that a
subordinate agency is not an independent agency. D.C. Law 6-85, S 107(2).

13 The D.C. Administrative Procedures Act provides that "independent
agency" means any agency of the government of the District with respect to
which the Mayor and the Council that is not authorized by law, other than
by this title, to establish administrative procedures, but does not
include the courts of the District and the District of Columbia Tax Court.
The District of Columbia Administrative Procedures Act of 1968, Pub. L.
No. 90-614, S 102(5). The Act did not enumerate specific agencies that
were independent.

Procurement Reform Amendment Act of 1996

The Procurement Practices Act was amended by the Procurement Reform
Amendment Act of 1996 (reform act) with the primary statutory purpose to
centralize procurement in the Office of Contracting and Procurement. 14
The law required this office to be headed by a Chief Procurement Officer
(CPO). By delegation of the Mayor, the CPO has the exclusive contracting
authority for all procurements covered by the Procurement Practices Act.15
The reform act further centralized procurement in the CPO by requiring the
CPO rather than the Mayor to delegate contracting authority to employees
of District entities subject to the act and to employees of Office of
Contracting and Procurement who are contracting officers and specialists
in procurement. All delegations must be subject to limitations specified
in writing.

The reform act also changed some of the requirements for sole-source
emergency procurements, which the Procurement Practices Act authorized the
executive branch to use. Specifically, the reform act allowed contracting
officers to make and justify sole source emergency procurements when there
was an imminent threat to the public health, welfare, property, or safety
under emergency conditions.16 The requirement is implemented in the
District's regulations, which defines an "emergency condition" as a
situation, such as a flood, epidemic, riot, or equipment failure that
created the imminent threat.17

The reform act expanded the Procurement Practices Act's application to
include independent agencies, which were previously excluded from its
application. Specifically, the act applied to all departments, agencies,
instrumentalities, and employees of the District government, including
agencies which are subordinates to the Mayor, independent agencies,
boards, and commissions. It applies to any contract for the procurement of
goods and services, including construction and legal services.

14 D.C. Law 11-259 (1997).

15 Id. at S 105 (a) (b).

16 Id. at S 105 (p) (codified at D.C. Official Code S S 2-303.05(a) (4)and
2-303.12 (a)(1).

17 27 DC ADC 1710.2.

Despite the reform act's primary statutory purpose of centralizing the
District's procurement authority in the Office of Contracting and
Procurement, it excluded many entities from the authority of both the
Office of Contracting and Procurement and the Procurement Practices Act.
18 Specifically, it excluded:

           o the D.C. Council;
           o the D.C. courts;
           o the D.C. Financial Responsibility and Management Assistance
           Authority (Control Board), as Congress previously statutorily
           excluded the Procurement Practices Act's application to the
           Control Board and vested the Board's contracting authority in its
           Executive Director; 19 
           o the Office of the Chief Financial Officer (CFO), and required
           the Chief Financial Office, during a control year,20 to adopt the
           Control Board's procurement rules and regulations, except that
           during years other than control years, Office of the CFO must be
           bound by provisions in this act. 21

18 D.C. Law 11-259, S 104 (a)(c) (codified at D.C. Official Code S
2-301.04).

19 Under the District of Columbia Financial Responsibility and Management
Assistance Act (FRMAA) of 1995, Pub. L. No. 104-8 (1995), Congress
established the Control Board upon finding that the District government
was in a fiscal emergency, was plagued by pervasive mismanagement, and
failed to deliver effective or efficient services to residents. FRMAA, at
S 305(4). The Control Board was provided wide-ranging statutory powers to
improve the District government's operations, including authority to award
contracts and review and approve certain contracts. FRMAA, at SS
102(c)(2), 103(g), and 203(b).

20 A control year, as defined in the FRMAA, means any fiscal year for
which a financial plan and budget approved by the Control Board is in
effect, and includes fiscal year 1996. FRMAA, S 305(4). The District
government was under the Control Board's authority from April 1995 until
September 2001.

21 D.C. Law 11-259, S 104(c). Despite the provision that the Office of the
CFO must be bound by provisions in the Procurement Practices Act during
years other than control years, Congress has extended the authority
provided to the CFO to exercise the procurement authority granted to it
during a control year in several appropriations acts relating to the
District. The most recent appropriation act relating to the District
exempts the CFO's acquisitions from all provisions of the Procurement
Practices Act. Transportation, Treasury, Housing and Urban Development,
the Judiciary, the District of Columbia, and Independent Agencies
Appropriations Act, 2006, Pub. L. No. 109-115, S 132 (2005).

Further, the reform act added a new section in the Procurement Practices
Act,22 exempting the following entities from the authority of the
Procurement Practices Act and Office of Contracting and Procurement:

           o Redevelopment Land Agency with regard to real property or
           interests therein;
           o Administrator of Homestead Program Administration under
           Homestead Housing Preservation Act of 1986 with regard to disposal
           or transfer of real property;
           o Mayor to sell real property in D.C. for nonpayment of taxes or
           assessments of any kind;
           o Mayor and D.C. Council pursuant to D.C. Public Space Rental Act;
           o Convention Center Board of Directors pursuant to the Washington
           Convention Center Management Act of 1979;
           o Sports Commission pursuant to the Omnibus Sports Consolidation
           Act of 1994;
           o D.C. Housing Finance Agency;
           o D.C. Retirement Board pursuant to the D.C. Retirement Reform
           Act; and
           o Metropolitan Police Department's authority to make procurements
           of $500,000 or less, as provided in the D.C. Appropriations Act,
           approved April 6, 1996. (Pub. L. No. 104-134).

Since enactment of the 1996 reform act, the Council has amended the
Procurement Practices Act many times to exempt additional entities from
falling under the authority of the Office of Contracting and Procurement
or Procurement Practices Act or both, despite the Procurement Practices
Act's statutory purposes of creating uniform procurement laws in the
District and centralizing the District's procurement authority in the
Office of Contracting and Procurement. To date, in addition to those
entities mentioned above, the council excluded the following entities from
the authority of both Office of Contracting and Procurement and
Procurement Practices Act:

           o D.C. Water and Sewer Authority;
           o D.C. Public Service Commission;
           o D.C. Housing Authority, except for the provisions regarding
           contract protests, appeals, and claims arising from procurements
           of the Housing Authority; and
           o D.C. Advisory Neighborhood Commissions.

22 D.C. Law 11-29, S 320 (codified at D.C. Official Code S 2-303.20).

Further, the Council amended to Procurement Practices Act to exclude the
following entities from the authority of Office of Contracting and
Procurement, but they are subject to the Procurement Practices Act:

           o Director of the Child and Family Services Agency;
           o Criminal Justice Coordinating Council;
           o Director of the Department of Mental Health; and
           o Board of Education to solicit, award, and execute contracts,
           except for security for the District's public schools for security
           contracts to begin on or after June 30, 2005.

Also, the Council exempted delivery of electrical power and ancillary
services for the District from certain requirements of the Procurement
Practices Act, subject to Council approval.

In addition to these exemptions, the Council continues to use its
emergency act authority under the Home Rule Act to exempt the application
of all or certain provisions of the Procurement Practices Act or the
authority of the Office of Contracting and Procurement for certain
District entities or projects. These exemptions can last no more than 90
days or can become permanent if the emergency bill is accompanied by a
temporary bill bridging the gap between expiration of the 90-day emergency
bill and congressionally-approved permanent legislation on the same
matter.

Appendix III: Comments from the Chief Financial Officer for the District
of Columbia

Note: GAO comments supplementing those in the report text appear at the
end of this appendix.

See comment 2.

See comment 1.

See comment 4.

See comment 3.

See comment 5.

See comment 5.

The following are GAO's comments on the CFO's letter dated January 5,
2007.

GAO Comments

           1. As we state in the report, the CFO's analysis of fiscal year
           2004 direct voucher payments showed that $217 million fell outside
           a 1996 financial management and control order. It was only after
           the CFO, in 2005, added 7 more acceptable uses of direct vouchers
           to the original order, that these payments were found to be
           acceptable. The $4 million in payments referred to in the CFO's
           comments are those that fell outside this updated policy.

           2. We recognize that the CPO's office is not directly responsible
           for developing financial management policies. However, we believe
           that in order to effect meaningful procurement reform, the CPO
           should be consulted on any policy changes that affect
           procurement--particularly as such changes have been amended into
           the procurement law. Elevating the CPO within the District
           government, as we recommend, would facilitate needed coordination.

           3. Because the District's procurement law already establishes
           emergency contracting procedures, we stand by our finding and
           recommendation that including emergency procurements as an
           acceptable use of direct vouchers duplicates the provision in the
           law and allows agencies to bypass established contracting
           procedures.

           4. As we state in the agency comments section, we recognize the
           obligation to pay for accepted goods and services, but we are
           concerned that the current policy, now codified in the law, is a
           symptom of the lack of necessary management focus to minimize the
           number of unauthorized commitments that may be ratified and
           ultimately paid through direct vouchers. In meetings with CFO
           staff, they acknowledged that the ratification process needs
           strengthening to include, in appropriate cases, possible referrals
           for Anti-Deficiency Act violations.

           5. The scope of our review was on the District's procurement
           system as a whole, not on the direct voucher process. As part of
           this review, we examined and discussed with chief procurement
           officers reform efforts in other cities. Through these
           discussions, we learned that other cities have consistently taken
           steps to curb the use of direct vouchers where at all possible and
           to ensure strict controls are in place to hold employees
           accountable when their actions result in an unauthorized
           commitment to vendors.

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Ann Calvaresi Barr (202) 512-4841 or [email protected]

Staff Acknowledgments

In addition to the individual named above, Carolyn Kirby, Assistant
Director; Barry DeWeese; Cynthia Auburn; Rachel Girschick; Kevin Heinz;
Bill Petrick; Sylvia Schatz; and Karen Sloan made key contributions to
this report.

(120511)

GAO's Mission

The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site ( www.gao.gov ). Each weekday, GAO posts
newly released reports, testimony, and correspondence on its Web site. To
have GAO e-mail you a list of newly posted products every afternoon, go to
www.gao.gov and select "Subscribe to Updates."

Order by Mail or Phone

The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:

U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud, Waste, and Abuse in Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail:
[email protected] Automated answering system: (800) 424-5454 or (202)
512-7470

Congressional Relations

Gloria Jarmon, Managing Director, [email protected] (202) 512-4400 U.S.
Government Accountability Office, 441 G Street NW, Room 7125 Washington,
D.C. 20548

Public Affairs

Paul Anderson, Managing Director, [email protected] (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548

www.gao.gov/cgi-bin/getrpt?GAO-07-159 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Ann Calvaresi-Barr, (202) 512-4841 or
[email protected].

Highlights of [54]GAO-07-159 , a report to the Ranking Minority Member,
Committee on Oversight and Government Reform, House of Representatives

January 2007

DISTRICT OF COLUMBIA

Procurement System Needs Major Reform

To improve acquisition outcomes, in 1997 the District established the
Office of Contracting and Procurement under the direction of a newly
created chief procurement officer (CPO). Since then, the District's
inspector general and auditor have identified improper contracting
practices.

This report examines whether the District's procurement system is based on
procurement law and management and oversight practices that incorporate
generally accepted key principles to protect against fraud, waste, and
abuse.

GAO's work is based on a review of generally accepted key principles
identified by federal, state, and local procurement laws, regulations, and
guidance. GAO also reviewed District audit reports and discussed issues
with current and former District officials as well as select state and
local officials.

[55]What GAO Recommends

GAO recommends that the District's Mayor submit a procurement reform plan
to Congress. The former Mayor chose not to comment, but the new
administration indicated concurrence with most of GAO's recommendations
and intends to provide a plan within 60 days of the public release of this
report. Comments from the Chief Financial Officer were limited to the
section on direct vouchers. They indicated current review of their policy
and GAO encourages implementation of this report's recommendations.

The District's procurement law generally does not apply to all District
entities nor does it provide authority to the CPO to effectively carry out
and oversee the full scope of procurement responsibilities across all
agencies. A lack of uniformity in its procurement law and the CPO's
limited authority not only undermines transparency, accountability, and
competition but also increases the risk of preferential treatment for
certain vendors and ultimately drives up costs. The current law exempts
certain entities and procurements from following the law's competition and
other requirements, and according to current and former District
procurement officials, there is a push to expand independent procurement
authority--a move that would reverse action taken by the District a decade
ago. Other provisions of current law further erode competition. Notably,
the law provides broad authority for sole source contracting and
establishes high-dollar thresholds for small purchases, which are
generally not subject to full and open competition. Also, in implementing
the law, sufficient management oversight is lacking to ensure employees do
not make unauthorized commitments.

The District has been challenged to effectively manage and oversee its
procurement function, due in large part to the low-level position of the
procurement office in the governmental structure, the rapid turnover of
CPOs, and multiple players having authority to award contracts and affect
contract decisions. At the same time, the District does not have the basic
tools that contracting and agency staff and financial managers need to
effectively manage and oversee procurements--including a procurement
manual, a professional development program, and an integrated procurement
data system.

In summary, the District's procurement system does not incorporate a
number of generally accepted key principles and practices for protecting
taxpayer resources from fraud, waste, and abuse. Specifically, the
District lacks a comprehensive procurement law that applies to all
District entities over which the CPO has sole procurement authority and
promotes competition; an organizational alignment that empowers its
procurement leadership; an adequately trained acquisition and contracting
workforce; and the technology and tools to help managers and staff make
well-informed acquisition decisions.

To better ensure every dollar of its more than $1.8 billion procurement
investment is well spent, it is critical that the District have a
procurement system grounded in a law that promotes transparency,
accountability, and competition, and helps to ensure effective management
and oversight and sustained leadership. High-level attention and
commitment from multiple stakeholders--including Congress--are needed if
the District's procurement law is to provide the right structure and
authority and if procurement reforms are to succeed.

References

Visible links
  35. http://www.gao.gov/cgi-bin/getrpt?GAO-03-666
  36. http://www.gao.gov/cgi-bin/getrpt?GAO-07-45SP
  37. http://www.gao.gov/cgi-bin/getrpt?GAO-05-229
  38. http://www.gao.gov/cgi-bin/getrpt?GAO-05-911T
  39. http://www.gao.gov/cgi-bin/getrpt?GAO-04-870
  40. http://www.gao.gov/cgi-bin/getrpt?GAO-01-963
  41. http://www.gao.gov/cgi-bin/getrpt?GAO-02-230
  42. http://www.gao.gov/cgi-bin/getrpt?GAO-02-36
  43. http://www.gao.gov/cgi-bin/getrpt?GAO-04-544
  44. http://www.gao.gov/cgi-bin/getrpt?GAO-05-179
  45. http://www.gao.gov/cgi-bin/getrpt?GAO-06-577
  46. file:///home/webmaster/infomgt/d07159.htm#mailto:[email protected]
  47. http://www.gao.gov/
  48. http://www.gao.gov/
  49. http://www.gao.gov/fraudnet/fraudnet.htm
  50. file:///home/webmaster/infomgt/d07159.htm#mailto:[email protected]
  51. file:///home/webmaster/infomgt/d07159.htm#mailto:[email protected]
  52. file:///home/webmaster/infomgt/d07159.htm#mailto:[email protected]
  53. http://www.gao.gov/cgi-bin/getrpt?GAO-07-159
  54. http://www.gao.gov/cgi-bin/getrpt?GAO-07-159
*** End of document. ***