McKinsey and Company offers management consulting services to improve performance issues related to strategy, organization, operations, and business technology under a GSA Multiple Award Contract. Between 2006 and 2019, McKinsey collected almost $1 billion dollars under the contract.
When it came time to negotiate prices for option year pricing in 2016, McKinsey refused to provide auditors the records required to complete the preaward audit. Therefore, the audit report advised the contracting officer to obtain the necessary information or cancel the contract. However, instead of addressing the contractor's lack of cooperation during the preaward audit, a Federal Acquisition Service (FAS) division director removed the contracting officer from the contract negotiations and awarded the contract pricing with rates that were at least ten percent higher than those originally proposed.
GSA's Office of Inspector General (OIG) became aware of the situation and had concerns about how the contract pricing was awarded and how pricing was determined to be fair and reasonable. So it conducted an audit to determine whether FAS administered the contract in accordance with applicable laws.
The OIG found that FAS did not administer the contract in accordance with applicable laws, regulations, and policies. The OIG determined that the Division Director used invalid price comparisons, relied on unsupported information, and performed insufficient analyses to justify the awarded contract pricing. The OIG also found that the Division Director violated standards of conduct by advocating for McKinsey to other procurement officials. Finally, the Division Director impeded the audit by failing to take appropriate action as required by the FAR to obtain required data to complete the preaward audit.
According to the OIG, the Division Director's action to justify and award this pricing action violated federal regulations and the trust placed in him as a Government employee with fiscal responsibilities to the federal government and taxpayers. As a result of these actions, the OIG estimated that GSA customers could pay an addition $69 million per year over the five-year option period.
The OIG made a number of recommendations including one to cancel McKinsey's contracts. Other recommendations including a variety of improvements to internal controls, ethical training, and steps to ensure that independence is maintained at all times between contracting officials and contractors.
GSA concurred with most of the recommendations however instead of cancelling the contract with McKinsey, the GSA is attempting to renegotiate prices. No word on whether that will work.
The full OIG report can be accessed here.
Recent article on the GSA OIG report and recommendations.
No comments:
Post a Comment