Report Contents
The Department of State (Department) provides life support services, including food and water, to personnel working in Iraq through Baghdad Life Support Services (BLiSS) food services task order SAQMMA14F0721. The food services task order was awarded on March 1, 2014, with a base year and 4 option years at a total value of $362.5 million as of December 2017. To control food services costs, the Department established four primary controls: (1) A maximum Basic Daily Food Allowance (BDFA) that the contractor, PAE Government Services, Inc. (PAE), could charge per person, per day for food services, (2) a plan to convert BLiSS food services from a cost-reimbursement to a fixed-price task order, (3) a plan to implement a point-of-sale (POS) cafeteria system, and (4) a requirement to limit the number of Department-subsidized meals for individuals who do not live on Department posts in Iraq.
During an ongoing audit of cost controls for the BLiSS food services task order, the Office of Inspector General (OIG) found that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management (A/LM/AQM) did not effectively implement contractually established cost controls to protect the Department’s financial interests. With respect to the BDFA, OIG found that Contracting Officer’s Representatives approved contractor invoices for payments that exceeded the $20 allowance by $3.25 per person, per day during the base year. OIG also found that the Contracting Officer (CO) increased the BDFA for option years 1, 2, and 3 by $7 per person, per day without performing required analysis to establish that the Department received a fair and reasonable price for these services. As a result, OIG questions $3.55 million in BDFA costs paid from base year operations and $37.4 million in BDFA costs paid to PAE for option years 1, 2, and 3.
In addition, OIG found that the CO did not implement the other three contractually established cost controls. Specifically, a plan to convert BLiSS food services from a cost-reimbursement to a fixed-price task order was not implemented, nor was a plan to implement a POS cafeteria system. Furthermore, a requirement to limit the number of Department-subsidized meals for individuals who do not live on Department posts in Iraq was not implemented. For these three cost controls, OIG found that the CO did not modify the task order to formally remove the unimplemented controls or establish alternative controls that would protect the Government’s financial interests when procuring food services in Iraq. As a result, cost risk—the degree of cost responsibility and associated risk a contractor assumes when implementing a contract—for BLiSS food services in Iraq remained on the Government through the exercise of option year 3, and the Department paid approximately $4.1 million for unauthorized meals to local national employees.
OIG made 14 recommendations to the Department to address identified questioned costs totaling approximately $45 million and noncompliance with the contract terms and conditions. Specifically, 10 recommendations were addressed to A/LM/AQM to determine the allowability of questioned costs identified by OIG, recover those costs determined to be unallowable, and modify the BLiSS food services task order when appropriate. Based on comments from A/LM/AQM, OIG redirected three recommendations to the Bureau of Near Eastern Affairs (NEA) to perform a viability assessment of the POS cafeteria system, establish access controls at dining facilities, and deter local national employees from removing food items from the dining facilities. OIG addressed one recommendation to the Department’s Procurement Executive to implement ratification procedures, if deemed necessary, in accordance with Department policies. On the basis of responses received from A/LM/AQM and NEA/U.S. Embassy Baghdad to a draft of this report, OIG considers all 14 recommendations resolved pending further action. A synopsis of management’s comments and OIG’s reply follow each recommendation in the Audit Results section of this report, and management’s comments are reprinted in their entirety in Appendix A.
Report Terms
Report Recommendations
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management (a) determine whether the $3.55 million in questioned basic daily food allowance costs that OIG identified under the base year of Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721 was allowable per the contract terms and conditions, and (b) recover all costs determined to be unallowable.
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management (a) determine whether the $37.4 million in questioned basic daily food allowance costs paid to PAE Government Services, Inc. during option years 1, 2, and 3 of Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721 as identified by OIG are allowable, and (b) recover any costs determined to be unallowable.
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management perform price reasonableness determinations prior to the exercise of future option years and bridge contracts for Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721 to ensure that the Department receives a fair and reasonable price on food services in Iraq.
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management establish and implement internal procedures for Contracting Officers to perform price reasonableness determinations prior to exercising each option year and use that analysis as a tool for negotiating price on the associated option year. The policy should also require the Contracting Officer to maintain the documentation and associated analyses in the contract file.
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management instruct all Contracting Officers that they must comply with Federal Acquisition Regulation 17.207, “Exercise of Options,” prior to the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management exercising all future option years or bridge contracts under Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721.
OIG recommends that the Bureau of Near Eastern Affairs, in coordination with the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management and U.S. Embassy Baghdad, perform a viability assessment on the implementation of a point-of-sale cafeteria system under Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721 at Department of State sites in Iraq.
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management modify Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721 to update the requirement for a point-of-sale cafeteria system in pertinent contractual documentation, once the results of the viability assessment from Recommendation 6 are determined.
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management use contractual remedies under Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721 and seek adjustment from PAE Government Services, Inc. for relieving them of the requirement to implement the point-of-sale cafeteria system, pending the viability assessment from Recommendation 6.
OIG recommends that the Bureau of Near Eastern Affairs, in coordination with the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management and the U.S. Embassy Baghdad, determine whether it shall (a) establish controls that limit physical access to dining facilities by local national employees and individuals not serving under chief of mission authority to one meal per work day in accordance with Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721 or (b) appropriately modify the contract.
OIG recommends that the Bureau of Near Eastern Affairs, in coordination with the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management, establish controls that deter and prevent local national employees from removing food items from Department of State dining facilities in Iraq in accordance with Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721.
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management establish a contractual requirement for PAE Government Services, Inc. to maintain records of dining facility access by individuals not serving under chief of mission authority in Iraq.
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management (a) determine whether the $4.1 million in questioned costs for unauthorized meals paid to PAE Government Services, Inc. under Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721 as identified by OIG are allowable and (b) recover any costs determined to be unallowable.
OIG recommends that, if the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management does not seek reimbursement for $4.1 million in unauthorized meals paid to PAE Government Services, Inc. in response to Recommendation 12, the Procurement Executive at the Bureau of Administration, Office of the Procurement Executive implement ratification procedures in accordance with Department of State Acquisition Regulations 601.602-3-70, “[Ratification] Procedures,” for Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721.
OIG recommends that the Bureau of Administration, Office of Logistics Management, Office of Acquisitions Management inform all Contracting Officer’s Representatives, Alternate Contracting Officer’s Representatives, Bureau of Near Eastern Affairs officials, and Mission Iraq management officials involved with the Baghdad Life Support Services contract SAQMMA13D0120 food services task order SAQMMA14F0721 that they are not authorized to negotiate with or otherwise deal with the contractors on contracting actions, and that the Contracting Officer is the authorized agent with sole authority to negotiate, award, administer, modify, or terminate contracts on behalf of the Department.