Policy: Labor

Top OPM officials routinely use set-aside contracting to circumvent rules, IG says

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Watchdog,Labor,OPM,Inspectors General,Waste and Fraud,Luke Rosiak,Follow the Money,Spending,Veterans,Government Contractors

High-ranking officials in the Office of Personnel Management steered half a million dollars to a politically connected management consultant by pressuring existing contractors to hire him as a subcontractor, the agency's inspector general found.

The scheme was part of a widespread culture of routinely circumventing competitive bidding regulations for convenience, often using programs intended to favor "disadvantaged" businesses, the IG says in a new investigative report.

It was tipped off by a 2011 scandal at the Labor Department, in which the undersecretary in charge of veterans' affairs, who was also a member of President Obama's post-election transition team, resigned after investigators found that he had bypassed contracting regulations to get jobs for a former colleague, Stewart Liff.

The undersecretary, Raymond Jefferson, mentioned that Liff had also done work for OPM. The federal personnel agency's investigators found that, not only had similar misconduct occurred in Liff’s work for OPM and that it involved top advisers to then-OPM Director John Berry, who departed the agency last year, but that the problem with bypassing competitive bidding at OPM went far beyond Liff.

All culpable, according to the report, were Michael Grant, senior adviser to Berry; Kay Ely, then-associate director of OPM's Human Resources Solutions office, which does work for nearly every government agency; and other high-ranking officials and rank-and-file contracting officers.

They brought on Liff first to work for Labor under an inter-agency agreement, as Grant and Jefferson were friends.

As Grant insistently touted Liff to top OPM officials, they soon brought him on for several of their own agency's contracts.

"As a result of actions by Mr. Grant and Ms. Ely and the mismanagement within HRS ... approximately $450,000 in taxpayer dollars was paid ... so that OPM ... was guaranteed access to Mr. Liff via a subcontract without competition," the OPM final report released Monday said.

OPM officials bestowed favoritism upon Liff that was likely worse than that committed by Jefferson.

Though a government shutdown is perhaps the most far-reaching crisis that OPM could face, Grant expressed concern "about how Mr. Liff specifically would be affected if there was a government shutdown ... The way Mr. Grant phrased this concern was not about how the project would be affected, but rather the consequences that a shutdown would have upon Mr. Liff personally."

OPM honchos first tried to bill him as a subcontractor to one of the large companies that holds “indefinite delivery/indefinite quantity,” or IDIQ, contracts, which essentially keep them on an open-ended retainer.

But then, realizing that they would still have to compete it among at least a handful of bidders, they decided to use a small business set-aside instead, which let them immediately award a contract with no competition.

“I could bring him on through an 8(a) vendor we already have so the costs would be a little more then [sic] what he costs,” an OPM official whose name was redacted wrote.

The agency found an existing 8(a) contractor called Information Experts, which would take a small cut, while having Liff do the work.

The government "made clear to Information Experts that it would receive these awards if it subcontracted with Mr. Liff," the investigation said.

The billables submitted to OPM through Information Experts for Liff were then designed to secure whatever amount he “wanted to earn," according to investigators.

“If we need to make the price more palatable, we could add another say 200 hours or so to the estimate, and then reduce the hourly rate by 10% to get the same final number,” Liff wrote.

OPM paid him $6,000 to give a single presentation, for example.

But the waste went far beyond one contractor, and was made possible by violations of federal procurement regulation at the top and utter apathy in the ranks of the federal workforce, according to the report.

“We are concerned that a culture may have developed within these departments where the type of improper behavior uncovered in this investigation was deemed to be acceptable. ... leadership may have been more concerned about the appearance of following proper contracting procedures rather than actual compliance," the report said.

“No one appeared to have considered whether the government was receiving the best value for its money.

"We are concerned that it may have been a common practice at HRS to use small businesses as a 'pass-through' to hire a preferred vendor, thereby permitting that vendor to avoid competition."

One of Liff’s main tasks, ironically, was to perform organizational assessments to root out dysfunction and poor performance.

Mid-level contracting officials at OPM each passed the buck in questioning by investigators, saying it was “not their responsibility and each assumed that someone else had corrected the problem.”

In fact, the inspector general found that OPM had created its own additional “disadvantaged” business set-aside program on top of the existing one, which the report said it had no legal right to do.

When reviewing a list of projects on which Information Experts worked, an Information Experts employee commented that “we did a lot of OPM pass-throughs and those just are not much of anything,” the report said.

In an email, an OPM spokesperson said that "OPM has enacted a number of reforms to ensure the integrity and efficacy of our program and products. Soon after coming on board, Director [Katherine] Archuleta directed her new Senior Procurement Executive to review the procurement and contracting procedures across OPM, and specifically within HRS."

Yet Grant is still listed as a “counselor to the director” on OPM's list of senior staff.

Ely is also currently in charge of an enormous quantity of government contracts as director of IT schedule programs at the General Services Administration — never mind that OPM investigators found that Ely "failed to fulfill her responsibilities as the Associate Director of HRS."

GSA's website says Ely currently "oversees IT Schedule 70, the government’s largest acquisition vehicle dedicated to technology and telecommunications solutions."

A third OPM official implicated in the report, Frank Esquivel, now serves as deputy CIO for IT at the Interior Department.

Ely did not return a voicemail, and no one was available at Interior’s communications office.

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Luke Rosiak

Senior Watchdog Reporter/Data Editor
The Washington Examiner

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