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Auditors question FAA's ability to manage SE2020

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An audit calls into question Federal Aviation Administration's ability to manage the largest set of contracts ever awarded in the agency's history.

The indefinite delivery, indefinite quantity contracts--awarded to seven companies under the System Engineering 2020 solicitation--are cumulatively worth up to $7.3 billion over a decade. The contracts are meant to support projects, such as trajectory based operations, related to the FAA's ongoing FAA air traffic control modernization effort known as NextGen.

In a Transportation Department inspector general report (.pdf) dated March 28, the listed problems with the contract begin right away, with the agency's ceiling amount.

Auditors say internal agency estimates of task orders delivered on the SE2020 contract add to up no more than an estimated $5.1 billion. The $2 billion disparity between that internal estimate and the public $7.3 billion figure is important because the contracts are for labor paid on a cost reimbursable basis with the fee (governmentspeak for "profit") a fixed amount based on an estimate of the labor hours utilized. The contracts allow for a downward adjustment of the fixed fee if the FAA does not utilize all of the labor hours inherent in its $7.3 billion estimate.

But, say auditors, the downward adjustment does not result in the FAA paying out a fixed fee that would have been equal to the amount it would have paid with a lower overall contract spending ceiling, because the overestimate increased the value of a coefficient used to calculate the fixed fee.

"Consequently, FAA may pay contractors more in fixed fees than it should and may have to recoup these fees at the end of the contracts," auditors say.

FAA officials told auditors they went with a higher contract ceiling estimate to give them flexibility in transferring hours between contracts. They already had that flexibility, is what auditors say, and thus didn't need to inflate the contract ceiling.

Other problems auditors say they encountered include a "narrow" approach to past performance evaluations and a lack of performance-based acquisition. PBA is officially the preferred method for procuring services for most of the federal government, but that preference is typically more honored in the breach than in the observance.

For more:
- download the report, ZA-2012-082 (.pdf)

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