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In Brief: The Smithsonian Should Streamline and Standardize Its Architect/Engineer Contract Modification Process, No. A-12-03-1
Issued May 11, 2012

Why We Did This Audit

We conducted the first in a series of audits of the Smithsonian’s management of the National Museum of African American History and Culture (NMAAHC) building project.
This is the first of two reports covering the contract modification process for the NMAAHC project. We focused on the Smithsonian’s contracting process because previous OIG audits revealed weaknesses in this area and because management expressed concern about the efficiency of this process. Our overall audit objectives were to assess the efficiency and effectiveness of the Smithsonian’s: 1) contract modification process for the architect/engineer (A/E) and construction management (CM) at-risk contracts; and 2) oversight process for awarding construction packages under the CM at-risk contract. This report covered the process related to the A/E contract only.

What We Found

The Smithsonian should streamline and standardize its A/E contract modification process. First, we found that the Contracting Officer’s Technical Representative (COTR), following her office policy, developed independent government estimates (IGE) for more additional services than federal regulations require. As a result, the COTR is doing more work than necessary, taking time away from completing her other project responsibilities, and thus potentially delaying the modification process and project schedule.

Second, based on available documentation, we also found that the COTR appeared to have generally completed the IGEs late. As a result, the project team did not know whether the COTR prepared the IGE independently and used it to determine whether the A/E contractor’s fee was fair and reasonable — the intended purpose of the IGE.

Third, we found that the Office of Facilities Engineering and Operations (OFEO) did not submit modification packages to the Office of Contracting and Personal Property Management (OCon&PPM) timely, which delayed the Contract Specialist in OCon&PPM from issuing the modifications. Without a modification in place, the A/E contractor cannot bill, and the Smithsonian cannot pay, for work the A/E contractor started under a notice to proceed. Furthermore, there is a potential risk that the subcontractors may not be paid, jeopardizing a subcontractor’s ability to continue as a going concern. Having to replace a subcontractor may negatively impact the project schedule.

The problems related to the IGEs and the modification package delays were primarily caused by a lack of written policies and procedures within OCon&PPM and OFEO addressing the A/E contract modification process.

During the course of the audit, we also observed that the project team members improved communications by having the COTR timely notify other OFEO team members of upcoming additional services. However, expanding the COTR’s notification to include OCon&PPM would further strengthen communications.

In addition, we identified four instances of the A/E contractor performing unauthorized work for additional services. In all cases, the Smithsonian has since remedied these instances by authorizing the work.

What We Recommended

To improve the efficiency and effectiveness of the A/E contract modification process, we recommended that OCon&PPM and OFEO develop and implement relevant policies and procedures.

Management concurred with our findings and recommendations and has proposed corrective actions that will resolve the recommendations.

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