Audit of Department of State Efforts To Identify and Terminate Unneeded Contracts Related to Afghanistan

AUD-CGI-23-26
    Report Contents
    Unclassified
    Unclassified

    What OIG Audited
    The suspension of operations at U.S. Embassy Kabul, Afghanistan, on August 31, 2021, required action from Department of State (Department) program, contract, and financial personnel to identify and terminate contracts that were no longer needed. The Office of Inspector General (OIG) determined that the Department had $1.71 billion in open contract obligations related to Afghanistan in March 2022.

    OIG performed this audit to determine whether the Department identified and terminated contracts impacted by the suspension of U.S. operations in Afghanistan in accordance with federal and Department requirements. As part of the audit, OIG selected and reviewed eight contracts directly managed by the Bureau of Administration, Office of the Procurement Executive, Office of Acquisitions Management (AQM), on behalf of three Department bureaus.

    What OIG Recommends
    OIG made 12 recommendations to improve internal controls specific to the identification and termination of unneeded contracts. On the basis of the Bureau of Administration’s response to a draft of this report, OIG considers nine recommendations resolved, pending further action, and three recommendations unresolved. A synopsis of management’s responses to the recommendations offered and OIG’s replies follow each recommendation in the Audit Results section of this report. The Bureau of Administration’s response to a draft of this report is reprinted in its entirety in Appendix B.

    What OIG Found
    The Department did not adequately identify contracts that would require termination prior to or after the suspension of operations in Afghanistan, nor did it assess the bona fide need of open obligations related to Afghanistan until requested to do so by the financial statement auditor at the end of FY 2021. Specifically, the Department did not perform advance planning to identify contracts that could be impacted by the suspension of operations or take steps to identify and track Afghanistan-specific contracts. This condition occurred, in part, because the Department expected embassy operations in Kabul to continue after the withdrawal of the U.S. military from Afghanistan. In addition, the Bureau of Administration did not have a process defined in its policy and procedures to facilitate the identification of unneeded contracts following the suspension of operations. Consequently, the Department was unprepared to promptly terminate unneeded contracts and deobligate excess contract funds for application to other purposes.

    With respect to the eight contracts reviewed for this audit, OIG found that Contracting Officers (CO) did not terminate these contracts in accordance with federal and Department requirements, nor did they maintain sufficient, required documentation to support the contract actions taken. One reason for the contract administration deficiencies was insufficient management oversight. In addition, the Department did not have an effective mechanism to track contracts from termination to closeout and COs did not always maintain contract administration files in the mandated electronic document storage system. Furthermore, the Department’s policies and procedures related to contract termination were inadequate to guide the process. Until these deficiencies are corrected, the Department will be limited in its ability to provide proper stewardship of U.S. taxpayer funds and protect the legal and financial rights of the Department when executing contract termination and closeout procedures.

    Recommendation Number
    1
    Open Resolved Significant

    OIG recommends that the Bureau of Administration, in coordination with the Bureau of the Comptroller and Global Financial Services, develop and implement a process that can be used in response to an emergency situation at an overseas post to identify contracts that require termination or other contract administration actions.

    Recommendation Number
    2
    Open Resolved Significant

    OIG recommends that the Bureau of Administration develop and implement a contingency action plan that could be enacted to optimize Contracting Officers’ workload management during challenging periods, such as when a surge of contracts need to be terminated, suspended, or closed out.

    Recommendation Number
    3
    Open Resolved Significant

    OIG recommends that the Bureau of Administration develop and implement an effective tool to track the status of contracts from termination through closeout. At a minimum, the tool should identify the steps remaining to be completed in the termination and closeout process, including identifying overdue steps, and the time elapsed between key steps.

    Recommendation Number
    4
    Open Resolved Significant

    OIG recommends that the Bureau of Administration develop a plan to assess and take action to ensure Contracting Officers’ compliance with Department of State requirements regarding maintaining contract administration file documentation in eFiling.

    Recommendation Number
    5
    Open Resolved

    OIG recommends that the Bureau of Administration conduct a survey among Contracting Officers and Contracting Officer’s Representatives to identify issues related to the use of the mandated eFiling module and suggested improvements to the module, specifically pertaining to maintaining contract administration documentation.

    Recommendation Number
    6
    Open Resolved Significant

    Following implementation of Recommendation 5, OIG recommends that the Bureau of Administration (a) analyze the results of the survey to identify the factors hindering the use of eFiling to maintain contract administration documentation, including technical issues that need to be addressed and (b) develop and implement, if appropriate, a corrective action plan to increase the use of the mandated eFiling module.

    Recommendation Number
    7
    Open Resolved Significant

    OIG recommends that the Bureau of Administration update the Foreign Affairs Manual, Foreign Affairs Handbook, and supplemental procurement guidance to assist and support Contracting Officers in conducting contract terminations. At a minimum, the policies and procedures should include guidance detailing the contents of termination dockets, such as the type and extent of documentation to maintain; expected timelines for adding documents; and standardized methods for organizing and naming documents. The policy and procedures should also include helpful tools, such as a checklist of documents that are required to be maintained in the termination docket and a post-termination conference meeting template.

    Recommendation Number
    8
    Open Resolved Significant

    OIG recommends that the Bureau of Administration, in coordination with the Foreign Service Institute, modify contract administration training that is offered by the Department of State to include guidance on the contract termination process.

    Recommendation Number
    9
    Open Resolved

    Following implementation of Recommendations 7 and 8, OIG recommends that the Bureau of Administration develop a communication strategy and disseminate to procurement personnel the updates to policy, procedures, and training related to contract terminations to ensure awareness of contract termination process requirements, including documentation requirements.

    Recommendation Number
    10
    Open Resolved

    OIG recommends that the Bureau of Administration, within 45 days of issuance of this report, develop and implement a plan of action to address the contracts related to Afghanistan that are in the termination process to ensure prompt completion of the process and move contracts to closeout.

    Recommendation Number
    11
    Open Resolved

    OIG recommends that the Bureau of Administration, within 45 days of issuance of this report, develop and implement a plan of action to address the expired contracts related to Afghanistan that remain open.

    Recommendation Number
    12
    Open Resolved

    OIG recommends that the Bureau of Administration develop and implement a process to ensure that Contracting Officers comply with Federal Acquisition Regulation termination process requirements.