The federal government awarded more than two-thirds of the $26 billion in Recovery Act contract obligations through acquisition vehicles in place before the stimulus bill became law, according to a new report.

Pressure to act quickly on high-priority projects drove officials toward existing contracts, the Government Accountability Office reported on July 21. Officials were not concerned that a contract had been awarded before the American Recovery and Reinvestment Act was enacted in February 2009. When the contract was originally awarded, officials said the government had met its competition requirements, GAO reported.

As of May, the government has awarded 68 percent of the $26 billion through pre-existing contracts, and 32 percent through new contracts. Of the newly awarded contracts, 89 percent of the funds were awarded competitively. The other 11 percent of the money, awarded without competition, went to companies in small-business programs, GAO reported.

Directed by the Obama administration to spend the stimulus money quickly, program and contracting officials found programs, projects and contracts that would allow them to award the money in a short time. In talking to contracting officers at five federal agencies, GAO said the officials considered both the risks of using non-competitive contracts and the benefits of spending the money faster than going through the process of awarding a new contract.

For example, a sole-source, small-business contract took the Army Corps of Engineers roughly four months to award, while a new competitive contract would have taken more than a year, GAO reported.

The administration objects to sole-source contracts, but GAO found agencies justified their reasons for awarding a contract without competition.

In addition, GAO found that early on inspectors general dedicated more time focusing on work that they believed was of higher risk, rather than looking at contract spending, including contracts awarded without competition.

GAO said it was okay to attend to the riskier projects when agencies were under pressure to spend the money. However, GAO officials are concerned that a lot of contracts have been awarded without competition -- and without audits -- through the Small Business Administration’s 8(a) Business Development program without audits, according to the report.

It’s significant, GAO said, because, while the 8(a) program has safeguards, they aren’t always set up properly.

In response, Joseph Jordan, SBA’s associate administrator for government contracting, objected to GAO’s implication that the 8(a) program is more susceptible to fraud than other programs.

“Suggestions of wrong-doing without supporting evidence are detrimental to the 8(a) program and its thousands of eligible program participants,” Jordan wrote. Even so, SBA officials have worked to prevent fraud, he added.

Inspectors general from the Defense Department and NASA said they were beginning audits on Recovery Act money. NASA’s IG told GAO it intends to launch audits of the funds, which includes seven contracts that were awarded through the 8(a) program.

In addition, the Energy Department IG didn’t consider its Recovery Act contracting as a high-risk area because a significant portion of the department's funds went out through grants, according to its response to the GAO report.

Source:  http://washingtontechnology.com/articles/2010/07/22/recovery-act-audits-contracts.aspx