Summary report on the Department of Energy`s management and operating contractors` use of government supply sources

Since 1992, the Office of Inspector General (OIG) audited the use of Government supply sources by five Department of Energy management and operating (M&O) contractors. The Department of Energy Acquisition Regulation (DEAR) prescribes that M&O contractors should use Government supply sources to satisfy their requirements for goods and services when these sources are made available to them and when it is economically advantageous. Four of the five audits disclosed that M&O contractors did not always use Government supply sources when these sources were available at a lower cost to the Government. As a result, these contractors incurred costs of approximately $13.6 million more for the supplies and services than necessary. The audit reports addressing these issues are summarized. Management did not agree with all aspects of the audit findings. It raised several objections which, when analyzed, questioned the very basis for the Federal Supply Schedule Program and its application to the Department`s contractors. These included: (1) questions about the Regulation language establishing the Federal Supply Schedule Program, (2) the impacts the Federal Supply Schedule Program had on the ability of the M&O`s to meet their small and small disadvantaged business procurement targets, and (3) the cost effectiveness of the Federal Supply Schedule Program itself. In addition to management`s objections to several of the audit findings, the authors noted that the re-invention concepts embodied in the National Performance Review (NPR) appear not to support the policy of centralized procurement. The purpose of this report is to highlight unresolved issues so that policies related to the use of Government supply sources can be clarified for use throughout the Department`s complex.